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Summary of Rich Dad Poor Dad by Robert Kiyosaki

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About the Author

Robert Kiyosaki is an investor and entrepreneur with an estimated net worth of over $80 million. Famous for Rich Dad Poor Dad and also for more than 15 financial self-help books that have sold over 26 million copies worldwide.

Robert T. Kiyosaki Rich Dad Poor Dad

What will you learn from this book?

  • Mindsets and beliefs that make the rich, rich and poor, poor.
  • How to get out of the rat race.
  • Basics of investing.

Rich Dad, Poor Dad has been called the number one personal finance book of all time, boasting over 26 million copies sold. In his book, Mr. Kiyosaki illustrates the mindsets and beliefs that make the rich, rich and the poor, poor by contrasting the advice of his real dad with that of his financial mentor, who was the father of the author’s best friend.

Robert’s biological father was brilliant and charismatic, finishing his four-year undergraduate degree in less than two years, then going on to obtain a master and Ph.D. at two prestigious universities before rising to the number one position in the state of Hawaii’s educational system. He left debts to be paid upon his death, while Robert’s mentor (who never even finished eighth grade) became the richest man in the state, leaving tens of millions to his family and charity.

This one anecdote is indicative of a fact we all should know, but probably don’t know how to act upon: formal education teaches scholastic and professional skills, not financial skills. (Even “finance” classes are purely academic or professional, and don’t really teach what it takes to become rich).  The ubiquitous focus on formal schooling leads to graduates who may have good grades, but still have a poor person’s “financial programming.”

This book is all about mindset. If you’re looking for tips, tricks, practical advice, or a how-to guide, you’ll be disappointed. Poor dad was poor, and rich dad was rich, because of their thoughts about money and the actions to which those thoughts led.

Lesson 1: The Rich Don’t Work for Money

“If you want to be rich, you have to learn to make money…use your head.”

When you fail:

“You’re only poor if you give up. The most important thing is that you did something. Most people only talk and dream of getting rich. ”

Robert starts immediately with a lesson juxtaposing the rich and poor perspectives: “The poor and middle-class work for money. The rich have money work for them.”

The course of study that the poor and middle classes take is the conventional method – study hard in school, get good grades, then get a safe job with excellent benefits at a big company. The course of study to be rich is very different, and most people never take the time to learn it.

Instead, most people are stuck in an endless cycle of fear and greed. Fear of being without money compels them to work for it, and when they get the paycheck greed (desire) makes them spend what they work for. They work hard to get paid more, but then follow up raises with more debt or more expenses.

Most people want to feel secure with their money, so passion doesn’t direct them; fear does. It’s certainly easier to work for money, but it is not safer. You’ll get much more security by investing your time to create assets that generate money, rather than only getting paid for your hourly labor. Learning how to do this is the course of study to become rich.

The author has little sympathy for people who say, “I’m not interested in money,” or, “Money isn’t everything.” If that’s how you feel, why are you working eight hours a day, five days a week for it?

If you learn life’s lessons, you will do well. If not, life will just continue to push you around. People do two things. Some just let life push them around. Others get angry and push back. But they push back against their boss, or their job, or their husband or wife. They do not know it’s the life that’s pushing.

If you realize that you’re the problem, then you can change yourself, learn something and grow wiser. Most people want everyone else in the world to change but themselves. Let me tell you, it’s easier to change yourself than everyone else

“The poor and the middle class work for money.”
“The rich have money work for them.”

True learning takes energy, passion, a burning desire. Anger is a big part of that formula, for passion is anger and love combined. When it comes to money, most people want to play it safe and feel secure. So passion does not direct them: Fear does.

Most people, given more money, only get into more debt. Simply because it’s easier to learn to work for money, especially if fear is your primary emotion when the subject of money is discussed. Just know that it’s fear that keeps most people working at a job. The fear of not paying their bills. The fear of being fired. The fear of not having enough money. The fear of starting over. That’s the price of studying to learn a profession or trade, and then working for money. Most people become a slave to money… and then get angry at their boss.”

Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern is then set.

The pattern of get up, go to work, pay bills, get up, go to work, pay bills… Their lives are then run forever by two emotions, fear and greed. Offer them more money, and they continue the cycle by also increasing their spending. This is the Rat Race.

Rich Dad Poor Dad book summary

People also work for money because of desire. They desire money for the joy they think it can buy. But the joy that money brings is often short-lived, and they soon need more money for more joy, more pleasure, more comfort, more security. So they keep working, thinking money will soothe their souls that is troubled by fear and desire. But money cannot do that.

The sooner you forget about needing a paycheck, the easier your adult life will be. Keep using your brain, work for free, and soon your mind will show you ways of making money far beyond what you could ever get paid. You will see things that other people never see. Opportunities right in front of their noses. Most people never see these opportunities because they’re looking for money and security, so that’s all they get. The moment you see one opportunity, you will see them for the rest of your life.

Lesson 2: Why Teach Financial Literacy?

Most people fail to realize that in life, it’s not how much money you make, it’s how much money you keep.

So when people ask, “Where do I get started?” or “Tell me how to get rich quick,” the only answer is; “If you want to be rich, you need to be financially literate.”

Now, accounting is possibly the most boring subject in the world. It also could be the most confusing. But if you want to be rich, long term, it could be the most important subject. The question is, how do you take a boring and confusing subject and teach it to kids? The answer is, make it simple. Teach it first in pictures.

Rule One: You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule….Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets.

Here is how to tell the difference between an asset and a liability.

An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.

This is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities. It’s not knowing the difference that causes most of the financial struggle in the real world.

There is a flaw in the thinking of so many people. The flaw is that money will solve all problems. More money will often not solve the problem; in fact, it may actually accelerate the problem. Money only accentuates the cash flow pattern running in your head. If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending.

“In school we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk.” 

Because students leave school without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financially. They work harder but don’t get ahead. What is missing from their education is not how to make money, but how to spend money-what to do after you make it.

Rich Dad Poor Dad book summary

In summary: Financial literacy is something that is not taught in schools, even in finance classes. It’s a shame because financial literacy is really very simple. There is only one rule: know the difference between an asset and a liability, and buy assets.

The poor and middle class don’t become rich because they buy liabilities that they think are assets. The difference is simple but profound: assets create income, and liabilities create expenses. Assets move cash into your pocket; liabilities move cash out.

For example, most people think of a house as an asset. By the accounting definition, it is, but in reality, your home results in cash moving out of your pocket – the mortgage payment, insurance, property taxes, and, worst of all, the missed opportunities from having your money stuck in your house instead of available to work for you. Instead of pretending your house is an investment, acknowledge it as an expense. If you want a house (or a bigger house than you already have), first create assets that generate enough cash flow to pay for the liability that a house is.

The author contends that making money is not nearly as important as how you spend what you make. Why? Money (i.e., making more of it) only amplifies the cash flow pattern in your head.

Most people mistakenly view wealth in terms of net worth, or assets minus liabilities. The problem is, most of the assets people put in that equation are actually liabilities or are worth far less than people think. Wealth is not net worth; it is the number of days you could survive if you stopped working today.

Lesson 3: Mind Your Own Business

Most people work for everyone else but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage.

The poor and middle class spend most of their time and energy working for other people: their company (a paycheck), the government (taxes), and the bank (their mortgage and other loans). According to Mr. Kiyosaki, one particularly tragic fact is that if you calculate the amount paid for all types of taxes, the average American works five or six months out of the year just to pay the government. (Many countries are even worse.)

There is a big difference between your profession and your business. When ask people, “What is your business?” And they will say, “Oh I’m a banker.” Then I ask them if they own the bank? And they usually respond. “No, I work there.”

Don’t confuse your profession with your business, i.e., your asset column. The traditional school and job path is generally a necessary thing, but the problem is that you usually become what you study. Instead of allowing that to happen to you, don’t lose yourself in your schooling and job; rather, focus on your own asset column. You can keep your day job, but put your money in assets – businesses (as long as you don’t have to be around for them to make money), stocks, bonds, mutual funds, rental properties, notes, intellectual property royalties, etc. Once a dollar is in your asset column, never take it out. When you want to buy liability, first buy an asset that generates enough cash to cover the liability.

Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. A new car loses nearly 25 percent of the price you pay for it the moment you drive it off the lot. It is not a true asset even if your banker lets you list it as one.

For young people who have not yet left home, it is important for parents to teach them the difference between an asset and a liability. Get them to start building a solid asset column before they leave home, get married, buy a house, have kids and get stuck in a risky financial position, clinging to a job and buying everything on credit.

This chapter is reminiscent of Stephen Covey’s quadrant II activities – those things that are important but not urgent, for which you should first be making time. Refer to The 7 Habits of Highly Effective People for more on this.

Lesson 4: The History of Taxes and the Power of Corporations

The author delves into the origin of the income tax and the age-old battle between the rich and those who want to take money from the rich. What is important is where that history has brought us in the present day: the rich play the game smarter, legally avoiding taxes, while the middle class foots the bill for most of the government’s spending.

One important tax tool of the rich is the 1031, or “like-kind” exchange, which allows you to defer paying capital gains taxes on the sale of real estate if you use the proceeds of the sale to buy another (presumedly more expensive) piece of real estate.

The real reality is that the rich are not taxed. It’s the middle class that pays for the poor, especially the educated upper-income middle class.

Historically, in England and America, taxes were initially levied against only the rich. The idea of taxes was made popular, and accepted by the majority, by telling the poor and the middle class that taxes were created only to punish the rich. This is how the masses voted for the law, and it became constitutionally legal. Although it was intended to punish the rich, in reality, it wound up punishing the very people who voted for it, the poor and middle class.

Rich Dad Poor Dad book summary

Once the government got a taste of money, the appetite grew. The problem was that the government’s appetite for money was so great that taxes soon needed to be levied on the middle class, and from there it kept “trickling down.”

The rich, on the other hand, saw an opportunity. They do not play by the same set of rules. It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and the middle class. It seemed to me that the socialists ultimately penalized themselves, due to their lack of financial education. No matter what the “Take from the rich” crowd came up with, the rich always found a way to outsmart them. That is how taxes were eventually levied on the middle class. The rich outsmarted the intellectuals, solely because they understood the power of money, a subject not taught in schools.

Every time people try to punish the rich, the rich don’t simply comply, they react. They do not just sit there and voluntarily pay more taxes.

Another important tool is the corporation, which allows you to set up separate assets that generate income. The key here is that while an individual is taxed before expenses, a corporation is taxed after expenses. This simple rule means that if done properly, you can legally write off vacations, car expenses, health club memberships, restaurant meals, and so on. The poor earn, pay taxes, then spend; the rich earn, spend, then pay taxes.

Robert then revisits the idea of financial literacy, summarizing it in four parts:

1. Accounting. The ability to read and understand financial statements.

2. Investing. The science of money making money; creativity combined with strategy and formulas.

3. Understanding markets. The science of supply and demand; technical (emotion-driven) and fundamental (economic sense) investments.

4. Law. Understanding taxes and avoiding lawsuits.

Lesson 5: The Rich Invent Money

Three hundred years ago, the land was wealth. With the Industrial Revolution, wealth was owned by the industrialist. Today, wealth is information.

People complain that they don’t have enough money to take advantage of the deals they see. Even more often, they have opportunities that they can’t see. Most people know only one solution: work hard, save, and borrow. They don’t understand that both luck and money are things that are created. In contrast, the rich know that their mind is their most valuable asset.

If you’re not sure what this means, refer to my summary of Think and Grow Rich by Napoleon Hill, the classic treatise on the subject.

Essentially, you have two options in life:

  1. Work hard, pay taxes, save anything left over, and get taxed on the savings
  2. Take the time to develop your financial intelligence and harness the power of your brain to create assets

Most people buy packaged investments from real estate companies, stockbrokers, etc. The rich create investments by assembling a deal themselves. To do this, you need to develop three skills:

  1. How to find an opportunity that everyone else has missed.
  2. How to raise money.
  3. How to organize smart people.

You’ll have to take risks, but if you are informed and understand an investment, it’s not as risky as it would be to someone who is just rolling the dice and praying.

Lesson 6: Work to Learn – Don’t Work for Money

The author urges young people especially to “seek work for what they will learn, more than what they will earn.” Aim to learn a little about a lot instead of seeking specialization, because specialization is for employment, not for being rich. Instead, take the jobs you need in order to learn to manage cash flow, systems, and people. In particular, the author recommends that you be sure to develop the skills of communication, sales, and marketing, as those skills combine well with other skills, and are often necessary to create wealth.

Lesson 7: Overcoming Obstacles

Mr. Kiyosaki lists the five reasons that even financially literate people may not develop their asset columns:

1. Fear. Specifically, the fear of losing money. People who make money are not afraid to lose it. The rich do not build their wealth steadily, never losing money; they learn how to limit their losses, and turn those losses into opportunities.

“Just know that it’s fear that keeps most people working at a job. The fear of not paying their bills. The fear of being fired. The fear of not having enough money. the fear of starting over.
That’s the price of studying to learn a profession or trade, and then working for money. Most people become a slave to money… and then get angry at their boss.” 

2. Cynicism. Cynicism comes from unchecked doubt and fear, and it is expensive. A cynic will always have an excuse for why something is not possible. They criticize instead of analyzing. For example, people who don’t want to invest in real estate will say, “I don’t want to fix toilets.” Rich dad would buy a property at a price that would allow him to hire a property manager and maintain positive cash flow.

3. Laziness. Usually, the laziest people are the ones who are busy. People stay busy in order to avoid problems they don’t want to face or to avoid the work necessary to develop their ability to become rich – laziness by staying busy. Rich people have a desire that overcomes their laziness.

4. Bad habits. Our lives are more a reflection of our habits than of our education. As an overriding rule, the author insists that you “pay yourself first.” Take care of yourself first – physically, mentally, and financially – instead of first paying your boss, tax collector, or landlord.

5. Arrogance. The author defines arrogance as ego plus ignorance. The solution is quite simple: education, specifically financial education.

Getting Started

The author then offers some further tips, albeit not very specific ones:

1. Have a reason greater than reality. You need to have a reason to want to be rich, or the hard realities of life will wear you down. This starts by knowing what you don’t want (to work your whole life, etc.) and what you do want.

2. Choose daily. Every day and every dollar is a choice to be rich or poor. Our spending habits will reflect who we are (not the other way around).

3. Choose friends carefully. Don’t choose your friends based on how much money they have, but be careful about being around cynics or people who don’t like talking about money. They will rub off on you. Instead, do your best to learn from people who support you, teach you, and make you a better person.

4. Master a formula and then learn a new one. Most people stop with the basic formula of “work hard, pay your bills, and save for retirement.” Go to one other formula – investing in foreclosures, for example – put it into practice, and perfect it before moving on to something else. There are two keys here: the ability to expand your mind to learn other income-generating formulas, and the discipline to put each one into practice before moving on.

5. Pay yourself first. We covered this one already; have the discipline to pay yourself in every way – physically, mentally, financially, etc. – before you pay your boss, your landlord, etc. If you don’t do this, you’ll find that there is nothing left over to pay yourself. This is an important shift in mentality.

6. Pay your brokers well. This includes all professionals you rely on – lawyers, accountants, etc. Only select professionals whose services make you money (or save you money), and pay them well. This is part of growing your asset column.

7. Be an “Indian giver.” The sophisticated investor’s first question is always, “How fast do I get my money back?” Make sure that you have a significant upside while limiting your downside. Consider not only the return on investment but also the assets you get for free when you get your money back.

8. Assets buy luxuries. Don’t buy a luxury until you have created an asset that pays for it.

9. The need for heroes. Find investment heroes that make it look easy, and imitate and be inspired by them.

10. Teach and you shall receive. The more you teach people, the more you will learn. This principle holds true elsewhere in life; in giving, you will find that things come to you much more easily.

Still Want More?

More to do’s:

1. Stop doing what you’re doing. Take a break and think about what is and isn’t working for you.

2. Look for new ideas. Read books on different subjects, particularly how-to books.

3. Find someone who has done what you want to do. Take them to lunch and ask for tips.

4. Take classes and buy tapes. This is the opposite of the “cynicism,” “laziness,” and “arrogance” in the chapter on obstacles. Take the time, put in the effort, and spend the money to invest in your education.

5. Make lots of offers. You never know which offer will be accepted, so make lots of offers to create great deals. Rejection is part of the process, so get used to it.

6. First look for people who want to buy, then for people who want to sell. This is a practical tip for assembling a deal, as discussed in lesson five.

7. Learn from history. Study success, and emulate it.

8. Action always beats inaction. If you don’t know what to do, overcome your inertia and just get moving. As Harry Truman put it, “Imperfect action is better than perfect inaction.”

College Education for $7,000

By way of summary, in this chapter, Robert tells the story of a friend who needed to save $400,000 to pay for his children’s education. He talks about how he helped his friend make a series of real estate investments – buying a house from an owner who needed to sell immediately, having the local real estate market experience an upturn, buying a storage facility, etc. – all within the tax shelter of a corporation.

Contrary to popular wisdom, it does not take money to make money. It takes education about money. Start early, buy a book, or go to a seminar. Start small, and practice. “It’s what is in your head that determines what is in your hands. Money is only an idea.”


This book is very readable, a fact that may have been lost in my summarization of the key points. The lessons are presented in story format, as the author talks and works with his rich and poor dads. The dichotomy is remarkably effective, using the “poor dad” and “rich dad” as third-party illustrations to criticize certain behaviors so we don’t feel bad about ourselves for making the mistakes the author condemns. If you read through these lessons and don’t yet understand or agree with the “rich dad” perspectives, get the book and read the stories – this is a book of perspectives, and perspectives must often be caught, rather than dictated.

With popularity comes criticism, and much of the criticism leveled at the book has merit. Perhaps the most frustrating aspect of this book is that it contains no “how” – only “why.” Much of the content has been described as “self-help boilerplate,” and I have to agree that the author did include quite a lot of fluff. Perhaps, however, this is necessary to give some readers the time and depth of emotion to catch rich dad’s perspectives.

The book is obviously primarily fiction – even if “rich dad” is actually a real person, the accounts of the author’s childhood conversations are far too detailed and specific to be even remotely true. Additionally, most examples and anecdotes in the book revolve around speculative real estate deals that may or may not resemble an actual occurrence. Keep in mind also that the author’s wealth comes largely from a business that revolves around inspiring people and getting them to pay for seminars; so learn the lessons, but don’t get caught up in the hype. Also, I’ve read several of the other books in the Rich Dad, Poor Dad series – as long as you understand the perspectives in this original publication, you don’t need to spend your time on them. There isn’t a single sentence about how to do any of this, only more detail on the mindsets and perspectives.

Regardless, Rich Dad, Poor Dad contains some powerful lessons on perspective, and these takeaways are probably worth the cost of quite a few seminars. To sum up:

1. Don’t work for money; work to create assets that generate money.

2. Know the difference between an asset and a liability, and buy assets. Only buy another liability if you first buy or create an asset that generates enough cash to pay for it.

3. Make putting things in your asset column your first priority, before what your employer, government, and bank want.

4. Study accounting, investing, economics, and law. This will allow you to recognize opportunities and methods to successfully build wealth, such as the use of 1031 exchanges and corporate structures.

5. Most people buy packaged investments. The rich create investments by assembling a deal themselves – finding an opportunity, raising money, and organizing people.

6. Take a job only for the skills it will teach you, never for the money, it pays you.

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