Rich Dad Poor Dad - Robert Kiyosaki

The Rich Dad Poor Dad is the most cliché personal finance book out there. It was recommended to me several times, and I only regret not reading it sooner.

The information that Robert Kiyosaki presents here is life-changing. If you grew up in the poor or middle class, you will literally change your relationship with money.

Today I will outline the 6 best takeaways presented in the book. If you are not already doing this stuff, consider reading the full book as it will potentially change your financial life.

1. The Rich Don’t Work For Money

Long gone are the days where you should think that you need to study hard to get a good job at a prestigious company.

Instead, learn with the purpose of buying and acquiring companies. This separates the middle class from the rich class.

Therefore, you should stop working for money and learn to work for skills instead. Work to learn new things that will help you build assets instead of slaving for 30 years for a company with a mediocre salary.

2. Master Financial Literacy

Every day, people who once had a lot of money go bankrupt. Similarly, people in the poor and middle class can emerge into the rich class with the right education. Personal finance education is what it is.

Unfortunately, financial education is not something that is taught in school. Which is why many of us receive our financial education at home. But that could be the reason why you will remain in the middle or poor class for the rest of your life.

Don't receive financial education from someone who is not financially successful. If your parents are not rich, don’t take their financial advice. Seek education from someone who has already arrived at your desired destination.

3. Rich People Acquire Assets, Poor Class Acquires Liabilities

The truth is that many people cannot differentiate between an asset and a liability. Robert simply explains the difference between the two. An asset is something that will put money in your pocket. Liability will take money out of your pocket.

It is a very simple idea that changed my financial mindset towards spending money. He goes on to explain how the rich spend their money on assets that produce income so they can buy the stuff they want or need.

For instance, rich people would automatically spend their income on stocks, real estate, or businesses. In contrast, the middle class would spend their income on bills, fancy cars, and home mortgages.

The key point is to pay yourself first. Use your income to keep acquiring appreciating assets that will fund your lifestyle with the income they produce. Enjoy life on a passive income.

4. Learn To Manage Risk

Don’t diversify your money into too many baskets if you have a small fortune. Instead, learn how to manage risk and how to make a fortune off of one investment.

When you have amassed enough wealth that it is difficult to make through your daytime job, then you can start to diversify your portfolio into other assets.

Diversification is used to reduce the risk you are exposed to and to maximize your returns. However, diversification can actually hinder your returns if you start with a small principal.

5. Avoid Taxes Legally Through Corporations

Robert stresses the point of the middle and poor classes losing up to 40% of their income to taxes. Thus, use corporations as a vehicle to protect your money from being taxed.

Earned income is the worst type of income because it gets taxed the most. The solution is to start a business and become your own employer. Corporation taxes are much less than earned income taxes.

In corporations, you get taxed after you are done spending. In contrast to earned income, you pay taxes before you start to spend, which costs you more money.

In addition, corporations protect you legally. If you were to be sued, the corporation, or whatever legal entity you have, would be sued, not you. This means your personal wealth is protected.

6. The Rich Invent Money

The most important asset should be your mind. If your mind has financial knowledge and agility, it will create money for you out of nothing.

The key point here is to recognize opportunities that others do not see. If your mind is constantly looking for opportunities, you can make money just by connecting people.

For instance, he talks about how someone was selling his property for $75K when, in fact, it was worth $100K. He would then take that deal and sell it to a buyer at $100k and make the difference.

But can anyone see that the property was being undersold by $25K? That is the difference.

Bottom Line

The book literally changed my whole financial perspective. After reading it, it gave me the motivation to go out and learn more about personal finance and how I can build myself financially to escape the middle class.

The key points here are to pay yourself first, acquire assets, start businesses, feed your mind, and seize opportunities. When you start to implement these points, you will start to grow your wealth rather than just earning more money.