SUMMARY OF RICH DAD POOR DAD

The book, “Rich dad poor dad” is a masterpiece written by Robert Kiyosaki. The book is all

about money and financial literacy. It is a true story of the writer’s father who was a poor

father and other was his best friend’s father who was a rich man and the considered him his

rich father. They both shared their thoughts about money and how does the money works.

At first, the father of the writer told him about that how he has spent his life without doing

any business and being a poor but the other person who was the father of his best friend told

him about that how he started earning and with the passage of time he become quite rich. In

this book, the writer says that one does not need to have a higher income to become rich, in

fact if a poor person has literacy about the money and how to make money from money, then

he can also become a rich person.

The writer has given 6 lessons in this book. The first lesson is that the rich never work for

money and that the money works for them. The second is about why there is the need of

financial literacy? In the third lesson, he says that the rich invent money. The fourth lesson

shares an insight about the invention of tax. The fifth lesson deals with the focus on minding

your own business rather than looking at others and getting envied. The sixth and the last one

is that learn first rather than just running after the money.

The author shares the perspective of learning and encourages people to learn more as learning

can take a person a thousand miles away from the person who is successful but does not have

any financial literacy. He tells about the money that it works for 24 hours and can work for

generations. What he meant to say is that by working for some time with money, it will make

an empire for you and the generation after you can also lead a healthy and prosperous life.

This can be seen in the example of coke. It was introduced back in 1886 and was hardly able

to sell a few bottles in the initial year of its startup but it is still earning for the further coming

generations of the owner who introduced it. This is the power of money. But here the

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question is why one should not go after it? Because being rich is just a mentality. Assume

there is a person who is rich by appearance, but his thinking is just like a poor person. On the

other hand, there is another person who does not have any money but his thoughts and

thinking circle functions like a rich person, then no one can stop him from becoming rich. It

is just the matter of the perspective in the mind.

In this book, it has been told that a poor person just works to earn money and meets his daily

expenses but on the other hand, a rich person makes the money work for him. It means that

he invests, works, does business to make a dollar against a dollar. By this the author shares

the difference between the working for money and money working for you. He tells that

when you work for money, you give power to your employer to control you but on the

contrary when money works for you, it gives the power and authority in your hand and let

you control it. This is a great success for a person when he starts earning from his savings.

In addition to this in this book, the writer talks about the importance of the financial literacy

and the importance of investing the savings rather than just spending them on different

unimportant things. If a person has the knowledge of financial literacy, he can be break down,

sometimes in shape of loss but he will gain the power again because of that knowledge that

he has. On the other hand, a person who does not have any knowledge and sense of investing

and financial literacy, he will stay poor till his last breath and will end up the huge bucks of

money spending foolishly if he already has.

The author mentions that the life of the people is always controlled by two factors, first is fear

and second is greed. The people whose life is controlled by fear end up their life being poor

but the people whose life is controlled by greed become rich because they have the potential

of satisfying their greed, as the greed does not have any limit, so this greed works as a driving

force for the people who have greed and helps them in becoming more and more rich day by

day. The factor of greed lures them again and again to work more, to take more risks for their

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investments, and consequently, reap out the benefits from it. The more they take risks, they

more they get the return.

The majority of the people can work eight hours a day for their job rather than working for

money for themselves. The author further elaborates it by comparing two people i.e., a rich

and a poor person. On the comparison, he draws the attention to the fact that a rich person

grows his assets throughout his life whereas a poor person increases the liabilities for himself

for the rest of his life. The reason behind this is the rich person rather stop spending on the

luxuries and invest the money instead, but the poor fellow keeps on spending the money for

these comforts of life. Even though he takes loans or borrows money from banks, family, or

friends for satisfying these needs. This is the reason why he ended up being in liabilities.

After starting to invest money or doing a business, the cash flows or the money which comes

as a revenue guides the person the way he should be handling it. The author also tells the

reason behind the failure of a person. He draws the attention of the reader towards the fact

why people do not have the financial literacy is that they do not know how to handle the cash

flows. The first expense of every person is tax, now it is on that person either he makes his

tax expense less or more. The higher the tax expense, the higher will be the income on hand

and the lower the tax expense, the lower would be the income of the person.

Moreover, the writer further addresses the two types of people in this world. One chunk is of

the people who are educated and successful but financially illiterate. The second group of

people are those fellows who are not much educated and not very successful in their life, but

they are financially literate. By sketching a comparison between the two chunks of people

even in the history, only those people are found succeeded and rich who have the financial

literacy. If a person wants to motivate himself for becoming rich, he should just think about

having a good standard lifestyle for his family. This will increase his potential and provide

him a thinking of numerous ways by which he can start making money. A rich person always

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looks at his asset’s column, he always buys assets which help him make more money in

future or at the present time. On the contrary, a poor person merely increases his expenses as

well as the liabilities throughout his life. A rich person always focuses on building up the

asset’s column in comparison to most of the poor fellows who have their focus on the income

statements. The main difference between poor and rich is their dealing with the risk factor.

The poor is always afraid to afford risk whereas a rich person is always ready to take risk for

the expansion of his income and his assets. The rich will always buy luxuries at the last

whereas the poor will buy the luxuries at first. For example, whenever a person starts earning,

he will buy a nice car at first whereas a person which has a rich mindset will buy the car at

the last after having a lot of assets and a wide range of income. The author shares that the

financial IQ is made up of knowledge from four wide expertise. These areas are accounting,

investing, understanding markets and the laws regarding these. The people who get ahead are

not the smart ones but those are the bold ones who have the courage to take risks. Most of the

people who never win financially are those whose pain of losing money is far greater than the

joy of being rich. The rich people only know that savings can be used to make more money

not to pay bills.

The context of this book is that everyone needs the financial literacy despite their field of

work, so that a person could be able to deal with the financial decisions that are needed in life

without considering any financial analysist or any other person who have the knowledge of

investing. The financial literacy is so important that it can make a poor person rich in a very

short time and a rich person poor if he does not have any literacy of finance or investment. It

not only makes a person rich but also makes him observe every little thing that happens in

market and that can affect the investment decision.