Book Summary: Rich Dad Poor Dad
This book helped me realize that being rich is more about the way you think - not about what you have.
The book in 3 Sentences
- True assets are the key to wealth because they are the resources that put money into your pocket.
- Your Financial Intelligence Quotient (FIQ) is dependent on your commitment to continue to learn.
- Seek to win the financial game, instead of focusing on not losing.
Who Should Read It?
Anyone who wants to acquire or save more money. This book presents common assumptions that people have about money and allows the reader to decide for themselves if the assumptions are valid. I appreciate this challenge and now I am rethinking some of my money assumptions.
My Action Items
Grow my FIQ every month
I realize my FIQ is very low, so if I want to see changes I've got to learn more about accounting, investing, markets and law
Be willing to play the game, and play to win
This really comes down to risk. I'm realizing that if I really want to be rich I've got to play by a different set of rules. I still must be responsible but I don't have to be afraid to take action when it comes to seeking more financially.
Robert K.'s approach to investing is to win and he doesn't risk anything that he isn't ok with losing. So if he does lose the capital that was used in an investment he isn't hurting financially.
To be honest, I've essentially taken this approach when it comes to giving away money - why not leverage this approach for financial gain?
Analyze don't criticize
When comparing the comments of his Rich Dad vs his Poor Dad, Robert K. helps me to realize that there are excuses that the poor and middle class make when it comes to finances. These excuses are generally accepted even thought they are the very thoughts that keep them in the poor or middle class.
For example, the comment that the "US tax system is a scam," whether it may be true or not, is an excuse to not learn how to make the system work for themselves.
The rich figure it out and make it work for them, so why can't we do the same?
When it comes to things I don't like or understand, like taxes, I'm not going to criticize why it's so bad. I'm going to figure out why it isn't working for me and figure out how to use it to my advantage.
I refuse to be victim.
My Top 9 Quotes
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.
Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, not your income column.
Why not own the [corporate] ladder?
Instead, I recommend to young people to seek work for what they will learn, more than what they will earn. Look down the road at what skills they want to acquire before choosing a specific profession and before getting trapped in the Rat Race.
For most people, the reason they don't win financially is because the pain of losing money is far greater than the joy of being rich.
If I pay myself first, I get financially stronger, mentally and fiscally.
Other people pay for my liabilities. They're called tenants.
Action always beats inaction.
My Notes
If there is one takeaway from this book, it's Rich Dad's definition of assets and liabilities.
To help unpack this and summarize the book I think it's best to use an illustration of a tree which has 3 parts: roots, trunk and branches.
ROOTS - Think like the rich
The roots anchor the tree to the ground and absorb nutrients to help feed the plant so that it can grow and be strong. The roots are mostly unseen and can stretch wide and deep, thus the strength of the tree is dependent on the strength of the roots.
The rich are curious and remain life-long learners. This is why they can win at the financial game. Being unwilling to learn can cost you. Robert K. even says that this is the biggest liability in your liability column.
In order to be rich, one has to think rich and approach money with this new way of thinking. A simple way of doing this is by rephrasing statements into questions. This allows your brain to think of possibilities instead of accepting mediocrity or failure.
For example instead of saying "I need a raise or I can't do xyz" ask yourself "How can I make more money?"
Or instead of saying "I have to pay too much taxes because that's just the way the system is" ask yourself "What is a better way to minimize my tax burden?"
To think rich, the root of your thinking should be the following two questions:
- How can I?
- What is a better way?
Trunk - Increase your Financial IQ
The trunk supports and protects the tree and allows for nutrients to be transported from the roots to the branches. The trunk also gives the tree height which benefits the plant itself and other living creatures.
Just like how a trunk gives height and protection for a tree, your Financial IQ gives you the wisdom and structure to guide your financial decisions.
These topics aren't the most popular but an understanding of them will help you make sound choices when it comes to money.
Also, just as a tree's trunk grows, you should grow in your Financial IQ by learning more and more about these topics which could change over time.
Branches - Take action
As a result of a healthy base, that is the trunk and roots, a tree can bear good fruit. That's where the branches come in to play. Branches are at the top of the tree and provide the structure needed for the tree to produce it's fruit, leaves and/or flowers.
And as a result, the new behaviors (branches) bear financial results (fruit).
In addition to allowing the tree to produce, the branches also provide shelter and shade. This is what rich can do - they can take care of themselves and provide comfort and protection for others through their financial decisions.
What are the new behaviors that will come as a result of thinking about money like the rich and understanding more about the financial systems of our society?
That's for you to determine. A few of mine are above in the action item section. But if you needed some help, I've compiled the list of next steps to get started from the last chapter of the book.
Steps to get started
- Find a greater reason for wanting wealth
- Choose daily to resolve to win financially
- Choose your friends strategically
- Use a formula
- Pay yourself FIRST
- Pay brokers nicely
- Be an Indian giver
- Use assets to buy luxuriates
- Emulate Heroes
- Teach and Give Generously
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