Rich Dad, Poor Dad


Author: Robert Kiyosaki

Recommended by: Leontine Jacobs

Date read: 10-02-2021

Tags: #finance #investing

My rating: 2 out of 5


Popular book on money management with a handful of decent insights. I’m fairly certain you could find those points in other books that aren’t as willingly deceptive (for one, rich dad is completely fictional) and self-congratulatory.

Highlights and notes


The poor and the middle class work for money. The rich have money work for them.

“Instead of admitting the truth about how they feel, they react to their feelings and fail to think. They feel the fear so they go to work, hoping that money will soothe the fear, but it doesn’t. It continues to haunt them and they return to work, hoping again that money will calm their fears, and again it doesn’t. Fear keeps them in this trap of working, earning money, working, earning money, hoping the fear will go away. But every day they get up, and that old fear wakes up with them. For millions of people that old fear keeps them awake all night, causing a night of turmoil and worry. So they get up and go to work, hoping that a paycheck will kill that fear gnawing at their soul. Money is running their lives, and they refuse to tell the truth about that. Money is in control of their emotions and their souls.”

Just be an observer, not a reactor, to your emotions. Most people do not know that it’s their emotions that are doing the thinking. Your emotions are your emotions, but you have got to learn to do your own thinking.”

“So what do we do?” I asked. “Not work for money until all traces of fear and greed are gone?” “No, that would be a waste of time,” said rich dad. “Emotions are what make us human. The word ‘emotion’ stands for ‘energy in motion.’ Be truthful about your emotions and use your mind and emotions in your favor, not against yourself.”


Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep.

Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.

Rule #1: You must know the difference between an asset and a liability, and buy assets.

An asset puts money in my pocket. A liability takes money out of my pocket.

As a child, my dad often told us that the Japanese were aware of three powers: the power of the sword, the jewel, and the mirror. The sword symbolizes the power of weapons. America has spent trillions of dollars on weapons and, because of this, is a powerful military presence in the world. The jewel symbolizes the power of money. There is some degree of truth to the saying, “Remember the golden rule. He who has the gold makes the rules.” The mirror symbolizes the power of self-knowledge. This self-knowledge, according to Japanese legend, was the most treasured of the three.

Why the Middle Class Struggle The middle class finds itself in a constant state of financial struggle. Their primary income is through their salary. As their wages increase, so do their taxes. Their expenses tend to increase in proportion to their salary increase: hence, the phrase “the Rat Race.” They treat their home as their primary asset, instead of investing in income-producing assets.

Fear is the main reason that people say, “Play it safe.” That goes for anything, be it sports, relationships, careers, or money.

The real tragedy is that the lack of early financial education is what creates the risk faced by average middle-class people. The reason they have to play it safe is because their financial positions are tenuous at best. Their balance sheets are not balanced. Instead, they are loaded with liabilities and have no real assets that generate income. Typically, their only source of income is their paycheck. Their livelihood becomes entirely dependent on their employer. So when genuine “deals of a lifetime” come along, these people can’t take advantage of them because they are working so hard, are taxed to the max, and are loaded with debt.

My next goal would be to have the excess cash flow from my assets reinvested into the asset column. The more money that goes into my asset column, the more my asset column grows. The more my assets grow, the more my cash flow grows. And as long as I keep my expenses less than the cash flow from these assets, I grow richer with more and more income from sources other than my physical labor.

Let’s say I have cash flow from my asset column of $1,000 a month. And I have monthly expenses of $2,000. What is my wealth? Let’s go back to Buckminster Fuller’s definition. Using his definition, how many days forward can I survive? Assuming a 30-day month, I have enough cash flow for half a month. When I achieve $2,000 a month cash flow from my assets, then I will be wealthy. So while I’m not yet rich, I am wealthy. I now have income generated from assets each month that fully cover my monthly expenses. If I want to increase my expenses, I first must increase my cash flow to maintain this level of wealth.


To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, not your income column. As stated earlier, the number-one rule is to know the difference between an asset and a liability, and to buy assets. The rich focus on their asset columns, while everyone else focuses on their income statements.

Keep expenses low, reduce liabilities, and diligently build a base of solid assets.

So what kind of assets am I suggesting that you or your children acquire? In my world, real assets fall into the following categories: •Businesses that do not require my presence I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job. •Stocks •Bonds •Income-generating real estate •Notes (IOUs) •Royalties from intellectual property such as music, scripts, and patents •Anything else that has value, produces income or appreciates, and has a ready market

There are times when people can’t find employment and starting a company seems like the best solution. But the odds are against success: Nine out of ten companies fail in five years. Of those that survive the first five years, nine out of every ten of those eventually fail as well. So only if you really have the desire to own your own company do I recommend it. Otherwise, keep your day job and mind your own business.


It is the knowledge of the legal corporate structure that really gives the rich a vast advantage over the poor and the middle class.

A corporation is merely a legal document that creates a legal body without a soul. Using it, the wealth of the rich was once again protected. It was popular because the income-tax rate of a corporation is less than the individual income-tax rates. In addition, certain expenses could be paid by a corporation with pre-tax dollars.

If you work for money, you give the power to you employer. If money works for you, you keep the power and control it.


In 1984, I began teaching via games and simulations, and I still rely on these tools today. I always encourage adult students to look at games as reflecting back to them what they know and what they need to learn. Most importantly, games reflect behavior. They are instant feedback systems. Instead of the teacher lecturing you, the game is giving you a personalized lecture, one that is custom-made just for you.

Financial intelligence is simply having more options. If the opportunities aren’t coming your way, what else can you do to improve your financial position? If an opportunity lands in your lap and you have no money and the bank won’t talk to you, what else can you do to get the opportunity to work in your favor? If your hunch is wrong, and what you’ve been counting on doesn’t happen, how can you turn a lemon into millions? That is financial intelligence. It is not so much what happens, but how many different financial solutions you can think of to turn a lemon into millions. It is how creative you are in solving financial problems.

Financial intelligence is made up of these four main technical skills: 1.Accounting Accounting is financial literacy, or the ability to read numbers. This is a vital skill if you want to build businesses or investments. 2.Investing Investing is the science of money making money. 3.Understanding markets Understanding markets is the science of supply and demand Alexander Graham Bell gave the market what it wanted. So did Bill Gates. A $75,000 house offered for $60,000 that cost $20,000 was also the result of seizing an opportunity created by the market. Somebody was buying, and someone was selling. 4.The law The law is the awareness of accounting corporate, state and federal regulations. I recommend playing by the rules.

The problem with “secure” investments is that they are often sanitized, that is, made so safe that the gains are less.

Unfortunately, the main reason most people are not rich is because they are terrified of losing. Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.


When it comes to money, the only skill most people know is to work hard.

“You want to know a little about a lot” was rich dad’s suggestion.

I recommend to young people to seek work for what they will learn, more than what they will earn.

The main management skills needed for success are: 1.Management of cash flow 2.Management of systems 3.Management of people

The most important specialized skills are sales and marketing. The ability to sell—to communicate to another human being, be it a customer, employee, boss, spouse, or child—is the base skill of personal success. Communication skills such as writing, speaking, and negotiating are crucial to a life of success.

In conclusion, I became both dads. One part of me is a hard-core capitalist who loves the game of money making money. The other part is a socially responsible teacher who is deeply concerned with this ever-widening gap between the haves and have-nots. I personally hold the archaic educational system primarily responsible for this growing gap.

  • M – So… nothing about systemic inequality, pitifully low minimum wages, etc, etc. I do believe education is part of the issue, but it’s too easy to conclude that information alone will help close the inequality gap. In certain situations, people simply don’t have the luxury of saying no to a bad deal, even if they recognize it as such.


Once people have studied and become financially literate, they may still face roadblocks to becoming financially independent. There are five main reasons why financially literate people may still not develop abundant asset columns that could produce a large cash flow. The five reasons are: 1.Fear 2.Cynicism 3.Laziness 4.Bad habits 5.Arrogance

  • M – And being systemically disenfranchised, to name just one other reason
  • I had to remind myself at various points that nothing in this book is based on actual research. It is one guy’s take from a position of privilege, and reminds me very much of the take that the poor are temporarily embarrassed millionaires: It’s not the system that’s at fault, people just need a break, or are simply refusing to make good decisions. Which is a weird take if you take a more thorough look at the capitalist system and its history of uplifting the few at the cost of the many.

The fear of losing money is real. Everyone has it. Even the rich. But it’s not having fear that is the problem. It’s how you handle fear. It’s how you handle losing. It’s how you handle failure that makes the difference in one’s life. The primary difference between a rich person and a poor person is how they manage that fear.

  • M – I highlighted this because this is apparently a core principle in his belief system, but… wow.

When you know you are ignorant in a subject, start educating yourself by finding an expert in the field or a book on the subject.

I liked what rich dad was saying. “So if I pay myself first, I get financially stronger, mentally and fiscally.” Rich dad nodded. “And if I pay myself last, or not at all, I get weaker. So people like bosses, managers, tax collectors, bill collectors, and landlords push me around all my life—just because I don’t have good money habits.”

  • M – So, “paying yourself first”, and leaving the bills for last makes you stronger? Because you’re forced to look for other/more sources of income to be able to pay them, I guess? Again, for this maxim to hold it should also be applicable to, for instance, single mothers working two jobs just to keep a roof over their kids’ heads, and I just don’t think it does._


To find million-dollar “deals of a lifetime” requires us to call on our financial genius. I believe that each of us has a financial genius within us. The problem is that our financial genius lies asleep, waiting to be called upon. It lies asleep because our culture has educated us into believing that the love of money is the root of all evil. It has encouraged us to learn a profession so we can work for money, but failed to teach us how to have money work for us. It taught us not to worry about our financial future because our company or the government would take care of us when our working days are over. However, it is our children, educated in the same school system, who will end up paying for this absence of financial education. The message is still to work hard, earn money, and spend it, and when we run short, we can always borrow more.

I offer you the following 10 steps as a process to develop your God-given powers, powers over which only you have control.

1.Find a reason greater than reality: the power of spirit

I don’t like being an employee.

2.Make daily choices: the power of choice

Invest first in education. In reality, the only real asset you have is your mind, the most powerful tool we have dominion over

3.Choose friends carefully: the power of association

I’ve noticed that my friends with money talk about money. They don’t do it to brag. They’re interested in the subject. So I learn from them, and they learn from me. My friends who are in dire financial straits do not like talking about money, business, or investing. They often think it rude or unintellectual. So I also learn from my friends who struggle financially. I find out what not to do.

Wise investors buy an investment when it’s not popular. They know their profits are made when they buy, not when they sell. They wait patiently.

It’s all “insider trading.” There are forms of insider trading that are illegal, and there are forms of insider trading that are legal. But either way, it’s insider trading. The only distinction is: How far away from the inside are you? The reason you want to have rich friends is because that is where the money is made. It’s made on information. You want to hear about the next boom, get in, and get out before the next bust. I’m not saying do it illegally, but the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. And that is financial intelligence.

4.Master a formula and then learn a new one: the power of learning quickly

In the entrepreneur classes I teach, I constantly remind people to not focus on their product, service, or widget, but to focus on developing management skills. The three most important management skills necessary to start your own business are management of: 1.Cash flow 2.People 3.Personal time

5.Pay yourself first: the power of self-discipline

To successfully pay yourself first, keep the following in mind: 1.Don’t get into large debt positions that you have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car. Being stuck in the Rat Race is not intelligent. 2.When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money, and then pay your bills. You will have increased your ability to make more money as well as your financial intelligence.

  • M – What the hell does he mean, “just make more money”?

I would venture to say that personal self-discipline is the number-one delineating factor between the rich, the poor, and the middle class.

A common bad habit is innocently called “dipping into savings.” The rich know that savings are only used to create more money, not to pay bills.

6.Pay your brokers well: the power of good advice

What I find funny is that so many poor and middle-class people insist on tipping restaurant help 15 to 20 percent, even for bad service, but complain about paying a broker three to seven percent. They enjoy tipping people in the expense column and stiffing people in the asset column. That is not financially intelligent.

When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes.

7. Be an Indian giver: the power of getting something for nothing

In the world of the asset column, being an Indian giver is vital to wealth. The sophisticated investor’s first question is: “How fast do I get my money back?” They also want to know what they get for free, also called a “piece of the action.” That is why the ROI, or return on investment, is so important.

The same is done with stocks. Frequently, my broker calls and recommends I move a sizable amount of money into the stock of a company that he feels is just about to make a move that will add value to the stock, like announcing a new product. I will move my money in for a week to a month while the stock moves up. Then I pull my initial dollar amount out, and stop worrying about the fluctuations of the market, because my initial money is back and ready to work on another asset. So my money goes in, and then it comes out, and I own an asset that was technically free.

I would say, on an average 10 investments, I hit home runs on two or three, while five or six do nothing, and I lose on two or three. But I limit my losses to only the money I have in at that time.

So wise investors must look at more than ROI. They look at the assets they get for free once they get their money back. That is financial intelligence.

8.Use assets to buy luxuries: the power of focus

9.Choose heroes: the power of myth

When it comes to investing, too many people make it sound hard. Instead, find heroes who make it look easy.

10.Teach and you shall receive: the power of giving

In my life, whenever I have felt needy or short of money or short of help, I simply went out or found in my heart what I wanted, and decided to give it first. And when I gave, it always came back.

  • M – This sounds nice as a sort of karmic balancing act, but this is hardly as dependable a process as he makes it out te be here.


Stop doing what you’re doing. In other words, take a break and assess what is working and what is not working. The definition of insanity is doing the same thing over and over and expecting a different result. Stop doing what is not working, and look for something new.

Look for new ideas. For new investing ideas, I go to bookstores and search for books on different and unique subjects. I call them formulas. I buy how-to books on formulas I know nothing about.

Find someone who has done what you want to do. Take them to lunch and ask them for tips and tricks of the trade.

Take classes, read, and attend seminars. I search newspapers and the Internet for new and interesting classes, many of which are free or inexpensive. I also attend and pay for expensive seminars on what I want to learn

Make lots of offers. When I want a piece of real estate, I look at many properties and generally write an offer. If you don’t know what the right offer is, neither do I. That is the job of the real estate agent. They make the offers. I do as little work as possible.

A friend wanted me to show her how to buy apartment houses. So one Saturday she, her agent, and I went and looked at six apartment houses. Four were dogs, but two were good. I said to write offers on all six, offering half of what the owners asked for.

The game of buying and selling is fun. Keep that in mind. It’s fun and only a game. Make offers. Someone might say yes.

I always make offers with escape clauses. In real estate, I make an offer with language that details “subject-to” contingencies, such as the approval of a business partner. Never specify who the business partner is. Most people don’t know that my partner is my cat. If they accept the offer, and I don’t want the deal, I call home and speak to my cat.

Finding a good deal, the right business, the right people, the right investors, or whatever is just like dating. You must go to the market and talk to a lot of people, make a lot of offers, counteroffers, negotiate, reject, and accept.

Jog, walk, or drive a certain area once a month for 10 minutes.

For there to be profit in a deal, there must be two elements: a bargain and change. There are lots of bargains, but it’s change that turns a bargain into a profitable opportunity.

Shop for bargains in all markets. Consumers will always be poor. When the supermarket has a sale, say on toilet paper, the consumer runs in and stocks up. But when the housing or stock market has a sale, most often called a crash or correction, the same consumer often runs away from it. When the supermarket raises its prices, the consumer shops somewhere else. But when housing or the stock market raise their prices, the same consumer often rushes in and starts buying. Always remember: Profits are made in the buying, not in the selling.

Look for people who want to buy first. Then look for someone who wants to sell

Moral of the story: Buy the pie, and cut it in pieces. Most people look for what they can afford, so they look too small. They buy only a piece of the pie, so they end up paying more for less. Small thinkers don’t get the big breaks. If you want to get richer, think big.

Think big. Retailers love giving volume discounts, simply because most business people love big spenders. So even if you’re small, you can always think big. When my company was in the market for computers, I called several friends and asked them if they were ready to buy also. We then went to different dealers and negotiated a great deal because we wanted to buy so many. I have done the same with stocks. Small people remain small because they think small, act alone, or don’t act all.

Action always beats inaction.


We looked for a house for two weeks, a house that would fit all our criteria. There were plenty to choose from so shopping was fun. Finally, we found a three-bedroom, two-bath home in a prime neighborhood. The owner had been downsized and needed to sell that day because he and his family were moving to California where another job waited. The owner wanted $102,000, but we offered only $79,000. He took it immediately and agreed to carry back the loan with a 10 percent down payment. All my friend had to come up with was $7,900. As soon as the owner moved, my friend put the house up for rent. After all expenses were paid, including the mortgage, he put about $125 in his pocket each month.

His plan was to keep the house for 12 years and let the mortgage get paid down faster by applying the extra $125 to the principal each month. We figured that in 12 years, a large portion of the mortgage would be paid off and he could possibly be clearing $800 a month by the time his first child went to college. He could also sell the house if it had appreciated in value.

Three years later, the real estate market greatly improved in Phoenix and he was offered $156,000 for the same house by the tenant who lived in it. Again, he asked me what I thought. I advised that he sell it, using a 1031 tax-deferred exchange.

Suddenly, he had nearly $80,000 to operate with. I called another friend in Austin, Texas, who then moved this tax-deferred capital gain into a mini-storage facility. Within three months, he began receiving checks for a little less than a $1,000 a month which he then poured back into the college fund.

A couple of years later, the mini-warehouse sold, and he received a check for nearly $330,000 as proceeds from the sale. He rolled those funds into a new project that would now generate over $3,000 a month in income, again, going into the college fund. He is now very confident that his goal will be met easily.

It only took $7,900 to start and a little financial intelligence. His children will be able to afford the education they want, and he will then use the underlying asset, wrapped in his legal entity, to pay for his retirement. As a result of this successful investment strategy, he will be able to retire early.