Avoid Promotions to Get Wealthy: Rich Dad Poor Dad by Robert Kiyosaki — NineMinuteBooks Book Summary
Here’s the second NineMinuteBooks book summary of Rich Dad Poor Dad:
Transcript and media below:
Hi everyone — today we’ll be looking at Rich Dad Poor Dad by Robert Kiyosaki. I’ve read some of his other books as well so I’ll be sprinkling some of the insights from those throughout this one. If you’re not quite at a point in life where you have a career because you’re still in school or going through a transition or something then I just want to say that you are doing EXACTLY what I wish I had done at a younger age; if I had educated myself just a little bit more when I was 21, I’d be tens of thousands of dollars wealthier now at the age of 29. So don’t make the same mistakes I did — buckle down and study up so you can make some small adjustments to your personal finance game now that could earn you years of freedom later.
Now before we dive in, I just want to say THANK YOU to everyone for the feedback on my first video, especially Mastar Media who was nice enough to share it with his fans. You guys are freakin awesome and getting to know you all in the comments was a lot of fun. If you have any other requests or suggestions or feedback or anything let me know. I’m totally open to some experimentation.
About the author
Robert Kiyosaki is in the businesses of real estate and intellectual property. From what I’ve gathered, he’s made his money primarily through purchasing rental property during recessions and then creating IP such as books, games, and seminars to share some of the best practices he’s learned throughout his journey to financial independence.
Robert begins by explaining how “Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth.” So keep doing what you’re doing right now and continuously educate yourself. To become wealthy, your education cannot stop once school ends. That is when the real education begins, and it’s up to you to define your curriculum. Most people don’t.
He then dives into the six main lessons that were imparted upon him by his Rich Dad.
The first lesson is that the rich don’t work for money; they work for assets.
What he means by this is that the rich don’t spend their days going off and working for a paycheck that they then use to merely cover their expenses. They spend their time and money building and accumulating assets, and minimizing their liabilities. We’ll define these a little bit later but an example of investing in assets is exactly what you’re doing right now — self-education.
A theme throughout Robert’s book is that your mind is your greatest asset, so you ought to invest in filling it up with stuff that will make you money.
He borrows from Edgar Dale’s Cone of Learning to explain how reading and lecture without any action are the worst ways to learn something; you need to exercise your knowledge by sharing it with others and actually doing the thing that you’re studying. Action is what educates, not passive consumption.
Robert talks about how, you need to monitor your emotions, don’t react to them. In order to monitor, when you feel emotions like frustration or anger or anxiety, delay your reaction, take a breather, and ask yourself, why am I feeling this way? What’s the solution? How do I move forward at the lowest possible (time/money/emotional) cost?
He says as emotions go up, intelligence goes down. This has actually been demonstrated to be true in scientific studies and has also been demonstrated to be true in my life. I swear my emotions are out to sabotage my life sometimes, I’ll step back and be like, what kind of an idiot acts like that? But I’ve gotten better at managing them and if I can do it, you can too.
Robert then asks the reader:
What’s an example from within your life where you reacted with your emotions?
I reacted with my emotions when I decided to purchase my condo. After deciding that I wanted to live in the los angeles area, I came out here and rented an office space to live in because I wanted to live downtown los angeles without signing a lease because I was shopping for a home; I also didn’t want to pay over a grand for an airbnb and I wanted privacy. So I rented out a month-to-month office in a highrise for $800 and lived in it while I looked for a condo to purchase. I had a great view but it was a bit cramped… I was getting tired of sleeping on an air mattress and decided to stop waiting for perfection and just buy something “good enough”. If I had waited, I probably would have been able to find a better deal. But it was my frustration and impatience that drove that decision.
Second lesson: It’s not how much money you make, it’s how much you keep
Robert explains how If you want to be wealthy, you have to be financially literate, and to become financially literate, you must study. Something to keep in mind is that most of the people out there driving really nice, new cars and living in really luxurious homes with designer clothes are not truly wealthy. Their lifestyles have inflated along with or even beyond their income — which is not where you want to be.
Someone can be highly educated, professionally successful, well-dressed and have all the trappings of opulence, and still not be able to survive for a very long time if they stopped working. And that’s the truest measure of wealth.
Where you want to be is living far below your means and focused on building a foundation. A big part of that foundation, Robert explains, is Accounting. He begins by defining assets and liabilities.
An asset is something that puts money in your pocket.
A liability is something that takes money out of your pocket.
He explains how a poor person generally has income that is used only to pay expenses such as rent, taxes, food etcetera, with no assets or liabilities; just bills.
Then he shows how someone in the middle class generally spends their income on liabilities that they believe are assets, but really aren’t — like a mortgage on the house they live in, or a car loan, or credit card debt, or school loans.
Finally, he shows how a wealthy person just has assets generating positive cash flow to cover their expenses. This is the sweet spot that you want to work towards.
Typically what happens is people experience growing expenses as their careers progress — in the form of bigger and better cars and homes, mortgages, kids, hobbies, or maybe medical expenses. This leaves no margin to invest in the development or acquisition of assets.
I think we can apply this concept to time and not just money. Invest your time to build assets, don’t just spend it hanging out and shopping and indulging. Robert advocates adopting a rule of thumb — only indulge in additional expenses with cash flow from your assets.
It’s also important to surround yourself with people who are constantly learning, growing, taking risks, trying new things out, and maybe failing, but relentlessly trying. These people will form the collective foundation of your mindstuff, and that mindstuff ought to aligned with your goals.
Third lesson: Mind your own business. Robert explains how the rich focus on their asset columns while everyone else focuses on their income statements.
Another perspective on this is explained in another of Robert’s books called the Cashflow Quadrant, where he explains how there are four ways people make money: Employee, Sole Proprietor, Business Owner, and Investor.
Employee — Desires job security with limited risk. They pay the highest tax rate. This is Poor Dad.
Sole Proprietor — Is their own boss. Their income is tied directly to how much they work and if they do not work, they don’t get paid.
Business Owner — hires employees to delegate as much as possible. They systematize their business so it will put money in their pockets even if they stop working.
Investor — Makes their money work for them.
So, what I would say is — don’t chase raises and promotions within your company to fund lifestyle improvements. Chase assets that will anchor you away from that Employee quadrant. Promotions will only help you become more financially secure if the additional money is used to purchase income-generating assets.
He also argues that if you don’t love what you’re investing in, you won’t take care of it.
Then Robert jumps into Lesson 4: The power of corporations
Another way that the rich make their money work for them is by allowing their wealth to protect itself from taxation in the form of corporation.
These corporations are nothing more than legal documents that register a business entity with the government. These documents then allow the owner of the corporation to spend his money before being taxed.
Lesson five: the rich invent money by taking action
Robert explains how It’s not the smart people who get ahead, but the bold.
Land used to be wealth and still is in many ways, but Robert emphasizes that information is the truest form of wealth and that bold utilization of that information is what gets you ahead.
Lesson six: Work to learn: don’t work for money
What he means by this is that in your choice of a profession, seek work for what you will learn and try to select something that will give you skills you can use to build assets. When considering leaving one job for another, don’t just think about its impact on your income. Think about its impact on your ability to load up your asset column with new skills, experience, or connections.
He wraps up by explaining the three types of income — The key to becoming wealthy is the ability to convert earned income into passive income or portfolio income as quickly as possible.
In Summary
The book paints a picture of the conventional earner — someone who endures a formal education that stifles their creativity and passion in favor of obedience and employability. This person generally gets a job, stops learning, and trudges through the gray lockstep of being a salaryman, without ever thinking there’s an alternative, an escape.
There is, and that begins with developing your finest asset — your mind. Once you have your salary, treat your job as a short-term solution to a long-term problem. Either focus on earning more from your job so you can invest your money into asset acquisition, or focus on optimizing your available time to invest in asset creation. If you choose the latter, you can optimize your utilization of time through habits, routine, exercising for the sake of mental health and productivity, and working remotely to eliminate commuting and office distractions. This way you can fatten up the time you have to invest — and not just spend.
Don’t allow your lifestyle to inflate until you have assets to fund that inflation. To build these assets, read. Explore. Experiment. Take risks. Try, fail, and try again. You’ll inevitably discover an intersection between your passions and market opportunities as you learn how to identify them, and you’ll have built a foundation of knowledge and experience to capitalize upon your calling when you are ready and able to hear it. But know that nurturing the growth of this foundation takes consistent action over the course of years.
Your job is a means to an end, and that end shouldn’t be death; it should be freedom. Now I haven’t quite figured out how to pull this off but I do believe in it whole-heartedly and I’m trying to unravel my passions, and I think we all should.
I think an interesting exercise to further explore this discovery of your passions is to imagine a fully automated, classless world, A world where goods and services are provided by robots that run on renewable energy and everyone gets whatever they want whenever they want it for free — how would you spend your time? What would give your life meaning if the construct of employment no longer exists? Write down what comes to mind and then think about how you can build assets related to that thing.
My impressions of the book
It’s important to keep in mind that this book, like all other books, is a product intended to generate high return on Robert’s investment, or ROI. So throughout the book, there’s a lot of “cross pollination” — pitching his other products to the reader. It’s both a product generating passive income and a sales channel pushing readers to more of his products and services.
Robert is extremely capitalistic and while admirable, his pride and hunger for more do show, but the core message was thought-provoking and well worth the price of the book. He has a web of cross-pollinated IP products that have served him well, but be mindful of this so that you’re not exploited. Be a skeptical defensive consumer; I found the Wikipedia article on him to be interesting — “He is subject of a class action suit against him by people who attended his high priced seminars and has been the subject of two investigative documentaries by CBC Canada and WTAE USA.[10][11] Kiyosaki’s company filed for bankruptcy in 2012.”. This isn’t all that surprising given the exploitative mindset he advocates in the book, but try to separate the sort of greasy ethos from the positive, actionable insight if you decide to pick the book up.
As far as the actual read — it’s very easy to read and it gets you thinking, which is great. The raw material in this book is valuable and at the end of the day, the format he chose got millions of people thinking about personal finance. So I think the net impact on both broad and individual scales is positive here.
The book’s impressions on me
I literally today saw someone post a note on my condo’s bulletin board trying to rent out two of the parking spots that they aren’t using. I live in Long Beach California which is in the process of gentrifying so there isn’t much demand for parking spots in this condo right now, but I think there will be in the future, so I called her up and offered $1000 to buy both spots. She said she needed one of them in December so I told her she could rent one of them for the $50/mo she was renting them for, and she said ok. I’ve acquired my first true asset, and I acquired it by doing something a little out of the ordinary, all thanks to this book.
Personal Finance
This is just a starting point. Personal finance is something you’ll want to research extensively on your own, and it may sound boring or daunting, but one weekend spent learning about this stuff could earn you years of financial independence so just suck it up and dive in. It’s worth it.
If you aren’t sure where to begin, here are a few things I’ve learned through years of making mistakes:
Start early — the difference between starting in your 20s and starting in your 30s is ridiculous. Compounding interest is extremely powerful:
Avoid consumer debt. Stop buying things that you don’t need. Don’t use your credit card to buy something you don’t have the cash for; use your credit card to build credit.
Live as far below your means as you can to create as big of a gap as you can between income and expenses.
Take full advantage of tax-advantaged investment vehicles like employer-sponsored 401(k), Roth IRA, HSA accounts.
Don’t use your HSA; you’re better off paying with cash because your HSA funds can be invested and any realized gains are not taxed if they’re used to cover past or future medical expenses.
Head on over to a community like the personal finance or financial independence subreddits to get some really juicy information and to surround yourself with people who have achieved what you’re trying to achieve. Here’s a little guide that the personal finance subreddit has in their wiki — there’s all kinds of gold like this over there and I revisit it on almost a weekly basis to make sure I’m on track. Stop by and check it out! It’s a nice group of folks.
Alright guys that’s about it for Rich Dad Poor Dad, I hope you liked this book summary. Let me know what you think and for the next book, I’ll be covering something a little bit sexier — it’s a book called Mating in Captivity Unlocking Erotic Intelligence by Esther Perel. If you liked this content and you want more of it, please like and subscribe and follow and share with your friends and everything so that I can make money from ads and spend more time digging up gold for you guys.
We read!
Originally published at nineminutebooks.wordpress.com on September 8, 2018.
