Rich Dad Poor Dad (Summary)
Why does your well-meaning, college-educated dad call your house your biggest asset, while his friend—a man who never finished 8th grade—calls it your biggest liability? The answer lies in the fundamentally different financial rulebooks the rich and the poor play by. One path leads to a lifetime on the hamster wheel; the other leads to financial freedom.
The Rich Don't Work for Money
The poor and middle class work for a paycheck, trading their time for money. The rich, however, have their money work for them by building and acquiring assets that generate passive income.
As a boy, Kiyosaki's 'Rich Dad' made him work for free. The goal was to force him to stop thinking about a wage and start seeing opportunities. This led Kiyosaki and his friend to create a comic book library, charging admission and earning money even when they weren't physically present. They had created their first asset.
Your House Is Not an Asset
The book's most controversial lesson is the redefinition of 'asset' and 'liability'. An asset puts money in your pocket, while a liability takes money out. Most people's primary residence is their biggest liability, not their biggest asset.
A rental property that generates $200 in positive cash flow each month after all expenses is an asset. In contrast, your family home costs you money every month for the mortgage, taxes, insurance, and repairs. It doesn't generate income, so financially, it functions as a liability.
Mind Your Own Business
Your profession (your job) is not your business. Your business is your asset column. True financial security comes not from your salary, but from building a strong portfolio of income-producing assets.
Ray Kroc, the founder of McDonald's, was once asked what business he was in. The audience said 'hamburgers'. Kroc replied, 'My business is real estate.' While his profession was selling hamburger franchises, his business was acquiring the valuable land underneath each restaurant, which became his true source of wealth.
Financial Literacy Is Power
Schools teach us how to be good employees but provide almost no financial education. Understanding subjects like accounting, investing, and tax law is what allows the rich to play the game of money differently.
An employee earns money, pays taxes on that income, and then spends what's left. A business owner with a corporation earns money, spends whatever they can on pre-tax business expenses, and is only taxed on the remaining profit. This simple difference in the sequence of cash flow, enabled by financial literacy, saves them a fortune.
