When I was in school, the teachers were always talking about how great the American education system was. This literally happened every year as I was going through grade school. I think they were given a script because – while it was a different teacher every year – they all said the same thing.
For some reason they always compared life now to being a serf in medieval France. Every year I heard this story. They talked about how the serfs in France were illiterate. A few of them might have been able to read and write French but since Latin was the language used within the circles of power, the serfs were completely at the mercy of their lords.
Because they were never taught Latin, they had no upward mobility. They also had little understanding of the law. Laws, too, were written in Latin so they just had to believe whatever they were told with regard to what was legal and illegal. Life was very difficult in medieval France.
When I was young, I believed my teachers. I thought I must be really lucky to have escaped that fate. Later in life I realized that I was just like those French serfs. While I had been taught English and math and a host of other subjects, I was completely ignorant of the languages spoken within the circles of power.
Nowadays those “languages” are financial literacy and law. Just like in France a thousand years ago, if you aren’t fluent in those two areas, you are severely disadvantaged in today’s world. The author who opened my eyes to this was Robert Kiyosaki.
In bits and pieces, Rich Dad Poor Dad flicks through Robert’s life, detailing significant points with his biological father (his Poor Dad) and his financial mentor (his Rich Dad). His actual father was a lifelong government employee. He gave Robert his moral compass but constantly gave his son bad financial advice; the advice of the poor and middle class.
Kiyosaki’s mentor, on the other hand, exposed Robert to the world of the rich. He learned that the rich play by a different set of rules. As long as Robert listened to his Poor Dad’s financial advice, Robert himself would be doomed to living in the Rat Race. By following in the footsteps of his Rich Dad, Robert escaped the Rat Race and instead lived his life on the Fast Track.
Primarily though, the book lays out Rich Dad’s formula for financial success. While the focus of the book is about money, business, and the habits of the wealthy, the lessons are useful for all aspects of life.
Rich Dad’s Education
Below is a brief summary of the lessons in Rich Dad Poor Dad. My brutish rendering of Kiyosaki’s points is no substitute for reading the book though.
Lesson 1: The Rich Don’t Work for Money
“…the sooner you forget about needing a paycheck, the easier your adult life will be.”
Having a job, or anything where you’re trading time for money, is highly limiting. While there are good, high-paying jobs out there, working for a paycheck can be a trap. Not only is it highly taxed, it makes you dependent on your employer.
Lesson 2: Why Teach Financial Literacy?
“Rule One. You must know the difference between an asset and a liability, and buy assets.”
Financial literacy is going to be the foundation of your financial empire. While most people are eager to get started building their wealth, they often do it without teaching themselves first. The results lead to a predictable roller coaster of highs and lows.
Don’t listen to society. Teach yourself what assets and liabilities REALLY are. Then dedicate yourself to buying assets.
Lesson 3: Mind Your Own Business
“Their profession may be a banker, but they still need their own business.”
Whatever else you do, have a legitimate scalable business venture that you are engaged in. Having a job and living below your means may be good but you are under the thumb of your employer, the government, and the bank.
There are plenty of options out there whether you want to build a brick and mortar business, get into ecommerce, stocks, bonds, options trading, real estate, and “anything else that has value, produces income, or appreciates and has a ready market.”
Lesson 4: The History of Taxes and the Power of Corporations
“In 1913, an income tax became permanent in the United States with the adoption of the 16th Amendment to the Constitution.”
Because the rich play a different game, they are able to side step many of the taxes that are such a burden to the poor and middle class. When you have a job, you pay taxes first before you spend your money on anything else.
When you own a business – even a small business – you deduct all of your expenses first and only pay taxes on what’s left over. The types of expenses you can deduct are many and varied. They include things like payroll and other large operating costs but also small expenses like a computer, gas, and meals as long as they are for the honest pursuit of profit.
Lesson 5: The Rich Invent Money
“Another case for developing your financial intelligence, over a lifetime, is simply that more opportunities are presented to you.”
By developing your financial literacy, you open yourself up to a world of opportunities. Robert Kiyosaki’s expertise is in the realms of real estate and corporations. There are plenty of opportunities in every industry though. By having a high financial IQ, you will naturally see deals or ways to innovate wherever your expertise is.
Lesson 6: Work to Learn – Don’t Work for Money
“The better you are at communicating, negotiating, and handling your fear of rejection, the easier life is.”
There is a place in your life for having a job. Often, skills can be gained by getting a job as a salesperson or in a field in which you want to build a business. This is best done early in life but if you missed something, there is little harm in going back to get that one skill that will propel your finances to the next level.
I’ve never felt like I was the target audience of this book. By the time Robert Kiyosaki wrote this book he was already a successful builder of corporations and a savvy real estate investor. Often the advice he gives is for people who are already in the Upper Class, trying to get richer. From that point of view, one of the themes of the book could be, “once you get rich, here’s what else you need to do.”
I also find it difficult to relate to someone who had such a different background than I did. By his own admission, Mr. Kiyosaki entered the game at age 9. While he is very candid about the mistakes he made along the way, he was lucky to have his rich dad to guide him, an advantage that most of us don’t have. As he advanced through the years that are financially stagnant for most of us, he made important moves to compound his skills as a business owner and, ultimately, an investor.
The most important take-away that anyone can get from this book is that there are different sets of rules out there. The Rich play by one set of rules while everyone else plays by another. What makes this book so great is that the author gives a very clear view of those different worlds. He also points out that anyone who wants to can enter the world of The Rich.
Beyond that, there are several nuggets of wisdom scattered throughout the book that apply to all aspects of our life. Robert Kiyosaki constantly stresses controlling your emotions, leadership, communication skills, and purpose. Having a handle on these things alone is enough to make the book worth reading.
This book is a must read for anyone who wants to take their finances seriously. While much of it is over the heads of those of us who have been living our lives in “The Rat Race,” there is a literal wealth of information for you no matter where you are in your financial journey.