rich dad poor dad

One of the Greatest Personal Finance Books – Rich Dad Poor Dad Summary

Why do I consider this book one of the best perosonal finance books and why do a Rich Dad Poor Dad summary?

Because it helps you develop a financial mindset and this will provide you exposure to do just that.

This book doesn’t teach you what investment strategies to use or how to earn 10000% returns from the stock market.

It teaches you lessons to better develop a financial mindset to help you build wealth. You could say it’s the way rich people have built their wealth.

Building this mindset is essential because having the mindset to accomplish something is critical to achieving your goals.

You don’t learn how to build a house by gathering materials and standing around wondering what comes next.

Instead, you learn to design the house, gather the necessary resources to make it sustainable, have a blueprint, create the foundation, then you start to build.

Why is building wealth or any different?

It isn’t. This book will teach you the importance and concepts necessary to start your journey. Even if you are just looking to achieve financial freedom, this is a book that can help someone do that.

So, allow me to take some of your time, and I will do a Rich Dad Poor Dad summary by chapters.

Disclaimer: This post contains affiliate links. For more information, please see the disclaimer page.


Let’s start with an introduction.

Rich Dad Poor Dad is a book written by Robert T. Kiyosaki. You’ve probably already heard of the book itself or other publications from Robert, but this book has been around for more than 20 years. Yet, it is still a pivotal book to start your financial journey.

The book introduces six lessons:

  1. The Rich Don’t Work for Money
  2. Why Teach Financial Literacy?
  3. Mind Your Own Business
  4. The History of Taxes and the Power of Corporations
  5. The Rich Invent Money
  6. Work to Learn – Don’t Work for Money

The book goes into much depth surrounding these lessons, but its teaching is focused on the life of Robert and his childhood friend Mike.

Robert had two dads; the title doesn’t lie.

Robert had his biological father, the poor dad, and Mike’s dad, the rich dad.

Through the novel, he narrates about the teachings of money and finance from his poor dad’s philosophy, spending much of his money, paying a lot of taxes, and working for his money.

Of course, Robert narrates the teachings of money from his rich dad, which you probably guessed, is the opposite of the poor dad’s.

It is important to view both of their perspectives to consider how we relate to it to question whether it is proper or not.

This is what I have continuously done in the journey to be more financially literate.

Robert talks about how he put these lessons to the test in his own life. As a result, he has lived the successes that were brought from it.

Let’s start looking at the lessons.

Rich Dad Poor Dad Chapter 1 Summary: The Rich Don’t Work for Money:

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

Now, of course, every individual’s financial situation is different. Is this the sole reason why poor people remain poor because they solely work for money?

No. I wouldn’t advocate that.

There are plenty of reasons why people don’t have much money and are struggling financially.

I typically try to view this from perspective of an individual who is not necessarily struggling financially.

Anyways, what does Robert mean by this?

Rich Dad Poor Dad aims to teach us the central concept. People will focus on getting money through working a job (working for money).

Instead, the rich will earn their money through passive income investments.

Well, what’s passive income mean?

I like to describe passive income as doing something once and earning money from it over time.

One of the best examples to provide is YouTube.

Content creators on this platform are earning tens of millions of dollars through the value they provide.

All by posting a video that took 15 hours (just an example) of time to prepare.

By doing the work once, over time, those videos can earn millions of views while racking up tremendous cash flow.

It is also in this lesson we learn about the rat race.

Think of the rat race as a pointless pursuit, an endless cycle.

Rich dad talked about how an individual’s fear and greed would control their life. The fear of being without wants or money motivates them to earn a paycheck, while greed makes them think about all their desires, they can buy with the earned money.

It can require them to need more money. Hence the rat race.

At one point, we were all apart of this race. Our desire for things we don’t need have led us to look for ways to earn some extra cash.

We can change this mindset and focus on learning how to make investments instead of buying those wants, then we can begin to create an escape from the rat race slowly.

Rich Dad Poor Dad Chapter 2 Summary: Why Teach Financial Literacy?

“If you want to be rich, you need to be financially literate.”

Have you ever had someone ask you, “how do I make money?”

Maybe not, but Robert discussed how often he is asked this question.

While instead of telling them what exactly to do, he says to become financially literate.

I’m sure there have been plenty let down by this answer, but it’s probably a necessary answer.

If you answered this question for someone and they did proceed to make money off your suggestion, are they keeping more than they spend?

If not, they will likely fear they will be without their wants, strive to earn more money, and be greedy with spending on their desires.

When the question is answered directly, what do they truly learn about wealth?

Probably little to nothing. Why would you learn about building wealth when you know someone who can make you tremendous amounts of money to purchase whatever you want?

You wouldn’t learn about building wealth.

Do you see where this is going?

To truly teach someone how to be wealthy, they must understand to escape this rat race and have your money work for you.

The importance of earning money is not how much money you make; it is how much you keep.

Some fail to realize this.

The more you spend, the less money you will have.

A simple principle that can be easy to live by.

A great way to keep more money is to cut back on your spending and learn below your means.

Yes, I mean being a minimalist.

It doesn’t mean you need to go full minimalist, eat Mr. Noodles every day, and use extra layers of clothes for warmth instead of paying for oil or electricity to save some money.

What it means is that any unused subscriptions you still pay for can be cut out, staying in to cook more often than eating out, or learning to reuse.

The possibilities are endless, and you can let your creativity shine to keep more money.

Photo by todd kent on Unsplash

Within the introduction is where we learn from poor Dad that:

“Our home is our largest investment and our greatest asset.”

While Rich Dad states:

“My house is a liability and if your house is your largest investment, you’re in trouble.”

Isn’t a house an asset? Why?

First, let’s look at what an asset is in personal terms:

An asset is something that makes you money.

Examples include:

Therefore, an increase in your assets, should get you an increase in income.

Pretty simple right?

A liability is something that takes your money.

Examples include:

  • Home loans
  • Car loans
  • Credit card loans

The more liabilities you own, the more you are burning your cash.

Again, this is pretty simple.

Robert wants you to build more assets and have fewer liabilities. As a result, you can grow your wealth and develop more riches.

Assets are designed to provide income for you, so I used examples of stocks and real estate.

Each provides more cash flow, and you can use the cash flow to buy more assets.

I thought a house was supposed to be an asset?

rich dad poor dad
Building = house (also Serge is back again, that’s cool)

Typically, you’ll see them listed as an asset on a company’s balance sheet, as shown above.

In accounting, assets are things that will provide a future economic benefit.

However, we can’t just totally rewrite the definition of an asset for business and accounting uses since it would take too long and disrupt the entire industry.

But using Robert’s terminology, since someone may take a mortgage out to purchase a house, they would be making payments on the house, and therefore it would be a liability.

In addition to this, Robert speaks about how the rich purchase assets and the poor and middle-class purchase liabilities they believe to be assets.

You can likely see how that makes sense now.

If not, look below.

Rich Dad Poor Dad provides various helpful illustrations that demonstrate the following:

  • Assets -> Income
  • Liabilities -> Expenses

While building up more liabilities, people can tend to believe the answer is more money. Through more money, though, Robert discusses how it can lead to an increase in spending as well.

By earning a sudden large increase in cash through the lottery, it can be quickly burned for this reason.

So if you want to purchase a house, what do you do? Not purchase it?

Don’t let any of the lessons discourage you from purchasing a house you want.

The idea is to recognize the difference between an asset and liability. We still have some use for liabilities like having a car to travel and a home to live in.

However, you can turn your liability into an asset by looking for ways to generate cash flow from it.

For example, with a house, you can post an unused room for rent or rent out space for vehicles.

Your creativity will shine the most in finding ways to generate cash flow.

Rich Dad Poor Dad Chapter 3 Summary: Mind Your Own Business:

“To become financially secure, a person needs to mind their own business.”

Ah yes. The common phrase, “Mind your own business.”

On the surface, we understand its meaning through the everyday use of the phrase.

However, Rich Dad Poor Dad teaches there’s a deeper meaning to it.

Don’t spend your life working for someone else.

Focus on building your assets up.

Robert discusses what real assets are to him:

  1. Businesses that do not require a presence
  2. Stocks
  3. Bonds
  4. Income-generating real estate
  5. Notes (IOUs)
  6. Royalties
  7. Anything else that has value will appreciate, provide income, and has a market.

There are plenty of other assets out there, allowing us to be creative in finding them for ourselves.

According to Robert, many people spend their lives working for someone else, making them rich by minding someone else’s business instead of minding their own.

Think about that for a minute before continuing. I’m sure you’ve contributed to that in some way.

They are also citing the importance of taking risks and breaking free of fear, while those people in the poor or middle class want to play it safe and cling to their job because they can’t afford to take risks.

The extreme importance of taking on risks to earn money is real.

We don’t just walk outside one day and find a get rich quick scheme.

Although, if you do find one, send me an email. Please.

Instead, to build your wealth, you need to manage your risks.

Look at what has happened to bitcoin.

What is a volatile investment for many turned out to pay millions to individuals who took the risk.

The book even discusses certain assets people buy that are not assets and how these proclaimed assets will fail an individual in a financial crisis.

They will purchase liabilities they believe to be assets.

Let us look at this picture.

Liability Example:

depreciation of car over time

A car typically depreciates 10% whenever driven off the lot and further can be depreciated between 10-15% a year.

So, looking at the chart, by the end of five years, a brand-new vehicle can be valued at less than 75% of its original value. This means that there has been much money wasted on the vehicle itself.

The power of what Robert calls a liability. Yet, some may consider this an asset.

Asset Example:

growth of stocks over 5 years

If we look at an asset like a stock, for example, you’ll see how it can appreciate over time.

The power of an asset.

So, in a financial crisis, Robert is trying to explain that minding your own business provides more cash flow to help recover or hurdle over the crisis. At the same time, with liabilities, you can become limited.

Therefore by following this:

 “The rich focus on their asset columns while everyone else focuses on their income statements.”

You are better equipped to handle financial situations and build your wealth.

Let the assets purchase your luxuries for you if you desire.

Focus on building the assets, minding your own business, and worry less about the income statement (income you bring in).

There’s no denying it’s important to focus on viewing the income you bring in. Still, by focusing and building your assets, the less you’ll have to worry about bringing in enough income, theoretically.

Rich Dad Poor Dad Chapter 4 Summary: The History of Taxes and the Power of Corporations:

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

This was a short chapter. But it does speak some truth.

There are some who pay no taxes.

In summary, this is what Robert preached:

Business owners of corporations:

  1. Earn
  2. Spend
  3. Pay taxes

Employees who work for companies:

  1. Earn
  2. Pay taxes
  3. Spend
Photo by CHUTTERSNAP on Unsplash

This is one of the significant reasons the rich don’t pay tax, according to the book.

It is true because corporations can spend their pre-tax dollars on certain expenses and in some cases be in a lower tax rate than an individual’s tax bracket for the same amount of income.

The history of taxes was also discussed in its origin: to have the rich pay taxes, which trickled down to the lower class, citing the Boston Tea Party as its origin.

While this was interesting to read, another focal point of the lesson was Robert’s four foundations of financial intelligence:

  1. Accounting – ability to read numbers and analyze a business’ strengths and weaknesses
  2. Investing – strategy of money-making
  3. Understanding markets – understanding economics
  4. Law – understanding taxes and tax protection

All of these foundations are wonderful ways to build your financial intelligence.

If you solely wanted to focus on the four above, you would build a healthy mindset to build your wealth.

Rich Dad Poor Dad Chapter 5: The Rich Invent Money:

“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth seeming instantaneously. An untrained mind can also create extreme poverty that can crush a family for generations.”

This lesson centers around how the rich don’t see an opportunity, but instead, they visualize the opportunity in their minds.

Another essential lesson was surrounding the importance of becoming financially literate and practicing.


Practice (See what I did there? Three practices). It’s important to practice in finding opportunities to build assets, even if you don’t invest in those opportunities.

But exceptionally, there will be moments in your financial journey where you make an investment that fails.

Failure is inevitable to most. What separates individuals from one another is how they learn to conquer failure by analyzing what went wrong to learn how to make it right.

That’s why whenever you’ve made a bad investment, you shouldn’t necessarily run to the next one and make the same mistake.

Accept the failure. Build your financial intelligence. And try again.

Rich Dad Poor Dad briefly explains self-doubt, which we have all experienced at a time or another.

To overcome self-doubt isn’t easy. You always think in advance, trying to plot out different scenarios, and question your every move.

However, there is extreme importance in learning how to trust your instincts.

If your instincts are wrong about something, then you’re wrong. But you can learn from it.

Robert Kiyosaki also developed a board game called CASHFLOW.

In the lesson, CASHFLOW is discussed that although it is a board game you can play with others, it should serve a greater purpose also to teach you to see opportunities with what you are given.

It’s similar to real life.

A person may own a boat but does not fish or like to travel on the sea.

They will see the boat as a liability and useless because they won’t use it.

However, someone else may see it as an asset, as the boat can be rented out to bring in some passive income.

How you train your mind to see and visualize things makes all the difference in any aspect of life. So if Robert says that luck is created, it’s time to create yours.

Rich Dad Poor Dad Chapter 6 Summary: Work to Learn – Don’t Work for Money:

“I recommend young people to seek work for what they will learn, more than what they will earn.”

I like this quote a lot because it is vital for us to learn new skills to be great at whatever we want to be known for.

As Robert talked about in the book, he proclaimed himself to be shy, so he took a sales job at Xerox to better communicate.

It’s essential to look at your weaknesses, just as Robert had, to learn where you can improve and be better than you were yesterday.

Plus, you don’t need to know everything about your weakness.

For example, Robert doesn’t need to know everything about communication.

Rich Dad says, “Learn a little about a lot.”

Learn how to turn your weakness into a strength and then just keep moving to the next skill.

Specialists can be hired for your business, or your personal life, with the necessary knowledge that you don’t have yourself.

Big corporations typically don’t perform their taxes. You see CPAs performing that duty because they have the adequate knowledge to do it correctly, efficiently, and effectively.

Robert also claims that the best management skills for success are:

  1. Cash
  2. Systems
  3. People

All things that are also critical to run a successful business.

Therefore, you can apply for a second job, as Robert advises, to learn a new skill, such as marketing skills, instead of working for the money.

Rich Dad Poor Dad also talks about overcoming certain obstacles:

  • Fear: Think like a big Texan. Win big and lose big. Embrace wins and losses, and don’t be afraid to play to lose.
  • Cynicism: Keep your eyes and mind open to visualize and analyze the opportunities everyone has missed.
  • Laziness: Don’t say “I can’t.” Challenge yourself to say, “How can I?”
  • Bad habits: Pay yourself first to motivate yourself to seek other income forms to pay creditors or others.
  • Arrogance: Being arrogant can cause you to lose money.

Concluding Remarks:

To build wealth, you need to understand where to start, which is this book’s biggest strength.

To recap everything that was covered in this article:

  • Learn to have your money work for you, not to work for money
  • Learn to build assets, not liabilities
  • The best income to earn is passive income
  • Build your financial intelligence to escape the rat race
  • Seek opportunities to turn liabilities into assets
  • Learn what is an asset vs. a liability
  • Mind your own business and don’t mind others’
  • The rich don’t pay taxes
  • Visualize opportunities to build wealth
  • Accept failure and learn from them
  • “Learn a little about a lot.”

Rich Dad Poor Dad uses several more examples than I have and obviously narrates throughout Robert’s life. But understand this book is not about teaching you directly about money. It’s to help you build a mindset.

What happens enxt?

Well, if you are interested in purchasing this book to read these lessons in more detail, I will leave a link to buy it on Amazon.

My question for you is, what is the most crucial thing Rich Dad Poor Dad has taught you? Leave your answer in the comments section.

Feel free to leave any other comments as well and follow us on Instagram above or below.

Note: I am not a financial advisor. You are trading at your own risk and should consult a financial advisor for any investment decisions. Do your due diligence when considering investing, and this information is for education/informational purposes only. The article “This is one of the best Personal Finance books:Rich Dad Poor Dad Summary (updated for 2021)” serves as educational content, not investing advice.

1 thought on “One of the Greatest Personal Finance Books – Rich Dad Poor Dad Summary”

Comments are closed.