Almost 8 years ago, I bought this book intending to read it and make myself rich! I finally got around to the reading part last week… The book is Rich Dad Poor Dad by Robert T. Kiyosaki.
First, let me give you my summary and key takeaways.
The book starts out by taking you through Robert’s childhood where he describes his experience with his own dad, the poor one, and his friend’s dad, the rich one. His friend’s dad teaches him and his friend by giving them experiences that demonstrate the principles of how to be rich, and it all comes down to thinking the way rich people think.
The way he teaches the principles he learned through story telling makes the book an easy read. It also allows us as readers to, in a way, experience the things that he did. In short, the book does a good job of teaching in a way that’s effective and easy to understand.
These are my key takeaways from the book.
- Buy assets that make money. This is the main lesson that’s beat in over and over throughout the book. He gives a nice list of ideas such as real estate, stocks, and bonds. But the point is that you should use your money to buy things that make you more money rather than buying things that only cost you money.
- Stop focusing on net worth and start focusing on cash flows. It doesn’t matter how much you have in assets if you have no money coming in each month. This comes back to buying, or investing in, assets that generate income.
- Your mind is your greatest asset. There is always a possibility that economies will collapse or that tragedy will strike and you’ll lose all of your money and assets. Your ability to come out on top depends on your knowledge and ability to think. So invest in your mind.
- Once you have assets that are making you a good income, then you can use that income to buy luxuries.
- Stop listening to naysayers. There will always be someone who thinks that the assets you’re buying are too risky, or that you should enjoy your money now instead of enjoying more later. Don’t listen to them.
- Most people aren’t rich, so why would you want to think and behave like most people?
These general principles, as taught in the book, are certainly worth learning. And keep in mind that this list is certainly not all inclusive. The book teaches a lot more, but these were the points that stood out to me.
The most important thing that this book does, is teach you how to look at money differently. It offers a perspective that’s probably different from the one you have today. For that reason, I think it’s worth reading (especially since it only costs about $7 new right now). The principles aren’t new, and aren’t exclusive to this book. There are probably even other books that teach them better, but the way Robert teaches them could really resonate with you.
Now let me tell you what I think you should look out for if you read it.
Don’t try to follow his examples exactly. Robert made a lot of money in real estate. But the timing and location of his purchases was perfect. The real estate market has changed dramatically since he got started. Getting financing isn’t quite as easy, and a lot of people are doing it so it’s harder to find really good deals. So don’t expect to make the kind of returns he did doing the exact same things, because things really are different today.
Robert mentions that rich people often fail several times along the way. This is true. I know of some extremely wealthy people who have been broke at least once in their life. That’s not uncommon. But if you notice, Robert doesn’t give much detail about his failures. Rather, he points out all of his successes. In fact, he emphasizes his biggest successes in such a way that it seems like every deal was a monumental success. He does this to motivate you, and teach you what he did that worked. But if you take it the wrong way, it can be misleading.
Don’t treat the book like an instruction manual. It doesn’t actually teach you any of the details of personal or business finance. It tells you how important it is for people to understand accounting and finance, yet doesn’t really teach anything about it. It gives you examples of income-generating assets but doesn’t teach you how to value them, or even really how to go about buying them. You will need to get that information somewhere else. But what it does do is motivate you to learn about those assets and use them to build wealth.
In summary, Rich Dad Poor Dad is a motivational book that offers insight into the way rich people view money. But it’s not an instruction manual. There isn’t a specific recipe for success. He doesn’t give enough detail to follow in his footsteps, even if you wanted to. He encourages you to learn about income-generating assets that interest you. But to do that, you’ll have to read other books, or at least the Income School blog.
So don’t plan on this book containing all the secrets of the rich. Instead, think of it as a window into how the rich think about money, and use that to help you shape how you think about it.