My Top 5 Takeaways from Rich Dad Poor Dad by Robert T. Kiyosaki

In Rich Dad Poor Dad, Robert T. Kiyosaki teaches you how to think about money the way the rich do. He uses an easy-to-read storytelling style to explain why the poor have a hard time saving money and how the rich stay rich. He tells the story of the financial struggles of his poor dad and how his rich dad overcame these challenges with a different mindset and approach to money.

My Top 5 Takeaways:

1. The rich don’t work for their money, they have their money work for them

Most people work a regular 9-5 job to make their money. Their income is determined by how many hours they work and how much money they make per hour. The only way that they can increase their income is by working more hours or by being paid more either through a promotion or more education. The issue with this is that time is limited and the more you increase your income, the more taxes you have to pay.

The way that the rich get around this is by having their money work for them. The rich buy assets that generate money without them having to spend much time managing them. Some examples of this are income-generating real estate, stocks, bonds, and companies that they own but are managed by other people. This is how the rich make their money work for them.

2. Spend your money on assets, not liabilities

The money that you make from your job should first be spent on assets, and the remainder spent on your expenses. Kiyosaki defines assets as things that passively increase your income and liabilities as things that passively increase your expenses. He explains that by buying liabilities such as a nice car or a nice home you are increasing your expenses and making you more dependent on your job. If you want to be able to quit the rat race, you need to have enough assets so that the income generated by your assets covers your expenses.

3. Reducing your taxes can save you a ton of money

You are taxed when you earn and taxed when you spend. The government takes a significant portion of your paychecks, and the more money you make, the more they take. This can turn out to be tens of thousands per year. The federal income taxes for Canada are about 25% of your salary.

Kiyosaki teaches how you can use the power of corporations to reduce these taxes. As a person, your income tax is applied to your income before you spend anything. As a corporation, your income tax is only applied to your leftover cash after your expenses. This significantly reduces the amount you spend on taxes and saves you a ton of money.

4. Work to learn, not to earn

Most people choose a job because it pays well and has good benefits. They plan to increase their wealth by going to school to specialize in a subject, get a good job, and work hard to get promotions. Kiyosaki teaches that the way to get rich is not through your job but through your assets. He explains that you should aim to reduce your dependency on your job, not increase it. He suggests that you should choose a job where you learn valuable skills and try to get experience in a wide range of fields. This way you learn a little about a lot and can hold your own in conversations with professionals in any field.

5. The importance of financial literacy

Since financial literacy is not taught in schools, it is up to us to learn about money. Most people spend too much time thinking about how to make and save more money and not enough time learning about money. By increasing our financial IQ we can take control of our finances and become rich. Robert teaches that there are 4 areas of financial IQ:

• Accounting: The ability to read and understand financial statements.
• Investing: The ability to use money to make money.
• Understanding Markets: The ability to apply the science of supply and demand to investments.
• The Law: The ability to use corporations to provide legal protection and tax advantages.

Conclusion

I really enjoyed reading this book. It taught me to think differently about how to become rich and inspired me to take action. It is well-written and easy to read. Although it lacks specific examples on how to become rich in today’s world, the lessons are timeless. It is not so much a how-to guide but more of a how-to-think guide. Rich Dad Poor Dad is a good starting point for anyone who wants to take more control over their finances.

Have you read Rich Dad Poor Dad? Let me know your thoughts in the comments below!