Rich Dad, Poor Dad

This is a personal review of “Rich Dad, Poor Dad” by Robert Kiyosaki, a book that I feel very close to, as it was the first “Personal Development” book I read.

Rich Dad, Poor Dad by Robert Kiyosaki

 

The story behind this tale, is of Robert, who had two dads. His real Dad, who was a school teacher, highly educated, successful at his chosen career, and his “second” dad – the father of his best friend Mike, who left school with no qualifications, lived in a run down house, and drove an old truck.

He was embarking on a Personal Development jopurnet early in live, by learning lessons from both of his dads, but they often had different viewpoints.

The punchline to the first chapter, the introduction, is that his Second dad, with the old house and tired old truck, was rich, and his real Dad, the highly educated lecturer, was poor.

The difference was their Financial Education.

 

His real Dad had lots of formal education from school, but it did not stop him running up mortgage debts, credit card debts, and so was constantly short of money.

His second Dad spent his life improving his financial education, and as a result he used his income to buy assets that put money into his pocket each month, not buying liabilities that took money out each month.

 

His real Dad had a nice car, and nice loan repayments on it, a nice house, and nice mortgage payments each month.

His second dad had a small house, and an old truck, but he also had a warehouse, construction companies, restaurants, that all paid him a good income, which he used to buy more assets.

 

One of the first lessons that Robert and Mike learn, is that working for a wage is not much fun. Mike’s dad gives them some work in one of his stores – cleaning shelves of canned food. They work hard, for little pay. They feel that they are learning nothing.

After Robert has an arguement with Mike’s Dad about not being taught anything, he finally stumbles across an idea. The old comics that are not sold at the end of the week are just destroyed.

Robert and Mike come to an agreement with the comic distributor to keep the comics, rather than destroy them. They then create a library of comics. They let their schoolfriends come to the library and read as many comics as they want for 30 cents.

This is their first business venture. They are earning money, and not in exchange for their own time. They discover the difference between profits and wages.

 

The book then expands on this concept, introducing the CashFlow Diagram, showing the typical cash flow of poor, middle class, and wealthy people….

 

The gist of the CashFlow Diagram, is as follows:

InĀ  order to become wealthy, you should use your income to buy Assets, which will then pay you further income.

Most people do not do this. They use their income to buy consumables, and they borrow money on loans and credit cards to buy luxuries. These liabilities then take money OUT of your pocket every month.