Introduction to Rich Dad Poor Dad, Book By Robert Kiyosaki
Robert Kiyosaki, the author of the book “Rich Dad Poor Dad”, had two fathers: a rich dad and a poor one. One was highly qualified and held a Ph.D. degree. Moreover, he was so capable that he completed his undergraduate degree in two years only.
The other father didn’t even peruse his education and left it during the eighth grade. While both fathers worked very hard, were successful, and made a lot of money, one father always struggled a lot with money. Whereas the other dad who was actually the father of his friend Mike referred to as “Rich Dad” in Robert Kiyosaki’s book became one of the richest people in Hawaii.
Robert Kiyosaki used to compare the two Dads a lot having completely different mindsets from each other. It became very difficult for him to decide which dad he should listen to. Neither had found success by now. Both were going through the phase of financial struggles as it was still an early stage of their careers.
Schools don’t provide education related to wealth creation. Thus, causing the poor and middle class to end up in debt. If a large number of people need financial or medical assistance, Medical and Social Security systems may run out of resources.
The drive to achieve something worthwhile in life, forces you to Transit from the mindset of “I can’t afford it” to “How can I afford it?”
While comparing Rich Dad with the Poor, Robert Kiyosaki had these important observations. Considering both of these Dads had a completely different thinking process.
Comparison Between Rich Dad Poor Dad Mindset
|Poor Dad||Rich Dad|
|The rich should pay more taxes||Taxes reward the producers|
|Study hard so you can get a job in a good company||Study hard to buy a good company|
|I’m not rich because of having children||I must become rich because I have children|
|Don’t talk about money over the dinner table||Dinner is the best time to talk about business and money|
|“Don’t take risks.”||“Learn to manage risk.”|
|A house is the biggest asset you own||A house is a liability|
|Pay your bills first||Pay your bills last|
|Struggles to save a few dollars||Creates investments|
|Teaches how to write a catchy resume||Teaches how to write a catchy business and financial plan|
|“I’ll never be rich.”||“I’m a rich man, and rich people don’t do this.”|
Rich Dad Lesson 1: “The rich don’t have to work for money.”
There has never been a clearer categorization between the rich and all other income classes. Some economists in California even observed that around 95% of profits between 2009-2012 went to the richest people in the world, which is one percent of the total population. Therefore, showing that the biggest revenue streams go to entrepreneurs and investors – not the employees.
Rich Dad Lesson 2: “Savers are losers.”
Only poor and middle class has the habit of saving money. Robert Kiyosaki considered savers as losers because of three major stock market crashes since 2000.
Dotcom Crash: 2000.
Real Estate Crash: 2007
Banking Crash: 2008
The initial three crashes of the 21st century were nothing in comparison with the massive crash of 1929. When you look at the financial data from these crashes you realize how big an impact they made on the world economy.
After each of the above stock market crashes American government and Federal Reserve Bank started “Printing Money” causing further inflation. And major affectees of inflation are always the people who have their money saved in banks which gets devalued.
Today’s interest rates are slowly but surely nearing the zero figure, which is what makes savers losers. Then again, a major chunk of savers is the people belonging to the middle class or poor.
Rich Dad Lesson 3: “Your house is not an asset.”
When he went on to get his book published in 1997, all the publishers who rejected him criticized Robert Kiyosaki for not consider a house as an asset. As per the general understanding, the house was the biggest investment a person can make.
However, In 2007 after the famous subprime mortgage crisis of the United States, when subprime borrowers began to default on their subprime mortgages, people realized that a house is not an asset.
The rich were responsible for causing the real estate crash, not the poor. The rich created financially-engineered products known as derivatives. Even Warren Buffet criticized these derivatives by calling them the “weapons of mass financial destruction”. These derivatives were the real reasons for the housing market to crash. Still, somehow, the poor were deemed responsible for this crash even when approximately $700 trillion were in these derivatives. It may be difficult to digest but that number has burst to $1.2 quadrillion in financial derivatives since then.
Rich Dad Lesson 4: “Why the rich pay less in taxes.”
Many a time people get annoyed when they realize that the rich pay less in taxes comparatively. But the catch here is that rich people pay less taxes legally and they should learn from them.
The poor and people belonging to the middle class pay more taxes than the rich. Because it is generally true that more the people work for money, more taxes they have to pay.
When presidents say to raise taxes on the rich, they never actually mean to raise taxes on the rich. What they actually mean is to further raise the taxes on the middle and upper-middle class.
Related Article: 7 Common Habits of Financially Successful People