Rich Dad & Poor Dad
"Rich Dad, Poor Dad" is an influential book written by Robert Kiyosaki which has revolutionized people’s understanding of personal finance. It proposes that financial literacy is the key to wealth creation and a successful life. This book has transformed the way people think about assets, debts, income, and expenses, and has inspired many people to start their own business or to invest in real estate, stocks, and other business opportunities.
The book tells the story of the author, Robert Kiyosaki, who grew up in Hawaii in the 1950s with two fathers – his real father, whom he referred to as “Poor Dad”, and his best friend’s father, whom he referred to as “Rich Dad”. Both men were highly educated and successful in their respective fields, but their approaches to money and investing were very different.
Throughout the book, Kiyosaki contrasts the mindsets and financial philosophies of his two fathers. In essence, the book is a guide to financial education, which explains how anyone can become wealthy by learning how money works, how to manage it, and how to invest wisely.
The first lesson in the book is that wealth creation doesn't depend on how much money one makes; rather, it’s how one manages the money he or she earns. Kiyosaki says that many people focus on earning a higher income, but they don't take the time to learn how to manage their money properly. Instead of accumulating assets, they accumulate liabilities in the form of consumer goods and services, which ultimately leads them to financial dependency and insecurity.
The book explains the importance of understanding the difference between an asset and a liability. Kiyosaki makes it clear that, while most people consider their cars, homes, and TVs as assets, in reality, they are liabilities in the sense that they are expenses that drain one's resources. He says that true assets are things that generate income, such as rental properties or investments in stocks and bonds.
Kiyosaki also stresses the importance of developing a stream of passive income, which he defines as income that is earned without having to put in any work. This is done through acquiring assets that produce income, such as rental properties or stocks, rather than relying solely on active income, which is earned through employment. According to him, starting a business is one of the best ways to achieve passive income.
One of the key concepts of the book is the Cashflow Quadrant, which divides people into four categories: E (employee), S (self-employed), B (business owner), and I (investor). Kiyosaki explains that the way to achieve financial freedom is to move from the left side of the quadrant (E and S) to the right side (B and I). He maintains that people in the E and S quadrants primarily trade their time for money and have limited income streams. On the other hand, people in the B and I quadrants generate income from assets and investments, which creates an infinite income stream.
Another crucial lesson that Kiyosaki teaches is the importance of financial education. According to him, most people are ignorant about money and investing, and that's why they struggle financially. Therefore, education and financial literacy are necessary to achieve financial security and wealth. He emphasizes that formal education doesn't provide adequate financial knowledge and that it's essential to engage in self-education and to learn from those who have already achieved financial success.
In conclusion, “Rich Dad, Poor Dad” is a book that has transformed how the world perceives money and wealth. It presents a comprehensive guide to achieving financial freedom by developing a profitable mindset, good money management skills, creating streams of passive income and investing wisely. Kiyosaki urges readers to develop discipline, patience, and persistence in their pursuit of financial success. It is an excellent read for anyone who wants to start their own business or invest in real estate or stocks.