Learn The Meaning of Financial Independence From “Rich Dad, Poor Dad” by Robert T. Kiyosaki

If you’ve been interested in personal finance, then you must’ve ran across the book “Rich Dad, Poor Dad” by Robert T. Kiyosaki. First published in 1997, it was the debut book written by this author. Interestingly, a lot of publishers felt hesitant to publish this book initially. However, its worth was realized once it became the number one financial book of all time. One of the key factors that make it a huge success is its interesting title, “Rich Dad, Poor Dad”, and the unapologetic perspective Kiyosaki broadcasts.

About The Author

Robert T. Kiyosaki is an American author and a businessman. He is the founder of the Rich Dad company and Rich Global LLC. Robert T. Kiyosaki was born in the U.S state of Hawaii. He was born on April, 8, 1947. Along with Rich Dad, Poor Dad, Robert T. Kiyosaki has written other informative books that deal with money and finances. These books include Rich Dad’s Cashflow Quadrant, Rich Dad’s Guide To Investing, and Rich Dad’s Retire Young, Retire Rich. 

What Is the Book About?

The book Rich Dad, Poor Dad, narrates the life of the author, Robert T. Kiyosaki, himself. The poor dad is the author’s father and a school teacher. He asks his son to work hard, save money, and focus on his studies. With that type of guidance, the author makes him out to be his poor dad. Whereas, on the other hand, the rich dad is the father of Mike, Kiyosaki’s childhood best friend. Kiyosaki considers Mike’s dad rich, and this dad’s guidance is for them to invest, work smart, and understand the way money works. Even though Mike’s father doesn’t hold a college degree and is a businessman, he still asks both Mike and Robert to take studies seriously. This is the only thing in common between the Kiyosaki’s dad and Mike’s dad.

Overall, there are two major principles discussed in this book by Robert T. Kiyosaki, which we’ll highlight here.

The First Principle – “Poor by Liability and Rich by Assets” 

Poor by liability refers to the behavior where when people have jobs or an income source, they usually buy things. They spend that income, and turn that into what Kiyosaki considers expenses. For instance, when people get their paycheck, they might buy cars, jewelry, entertainment, personal property, and various other things. These, as Kiyosaki considers them, are simply expenses that drains from the hard-earned income.

When people buy such things, they are actually getting into liabilities. For example, when an individual buys a car, they need to spend money on gas, insurance, and maintenance. Similarly, if you’re buying a house to live in, you are also simply draining your hard earned income. You need to pay for the bills, maintenance, property taxes, etc. All of these things bleed money and, as a result, are referred to as liabilities.

On the other hand, if you are buying assets such as buying a property that you can rent out, then instead of being just another expense, you are creating an income flow. In addition to this, investing in stocks is also considered buying assets as you will receive the dividends on a regular basis every year. All of these purchases would increase your income, unlike buying things that may bleed your money and are simply expenses. Ultimately, those who invest in assets are considered rich from Robert T. Kiyosaki’s perspective.

The Second Principle – There is a Difference in the Way the Poor and Rich Pay Their Taxes

The second principle is the way the poor and rich pay their taxes. Kiyosaki explains this principle in a very interesting manner.

According to Kiyosaki, the poor pays a larger proportion of their income as taxes in comparison to the rich. The reason is because the poor are usually employees working for others. This applies to every kind of employees, no matter how much they are earning. They are liable to pay their income tax at the federal income tax rate. The federal income tax rate may vary from 10% for the lower-income group to almost 39% as the income rises. 

However, in contrast, the rich are usually not employees. In fact, they are the owners of various businesses and companies. So, for those who own a company, the money that the company generates will usually be paid to them in the form of dividends. Obviously, dividends are taxed at a different rate in comparison to income. They are taxed lower than the income, especially when you hold the shares for a considerable amount of time.  In addition, the tax code has so many more ways for a business to reduce and cut taxes than there are for employees to reduce their income taxes.

The Rich Person’s Mindset

In essence, Kiyosaki illustrates throughout the book the various ways in which rich people have a different mindset in comparison those that are poor. They are smarter regarding how they think about money, and applies various conscientious tactics to create and maintain wealth. In his book, Kiyosaki dives in to many of these tactics and tips regarding money and finances he learned from his “Rich Dad,” who, as mentioned above, was the father of his best friend Mike. 

Even though Kiyosaki’s father was an educated man and earned well, he was still not able to become as rich as Mike’s father. He spent hours working tirelessly to earn the income he has, while Mike’s father did much less work and was a lot richer financially.

Along with the two main principles mentioned above, Robert T. Kiyosaki explains and dives into other important principles that sets apart the rich person’s mindset. These principles include:

• The Rich Don’t Work For Money
• The Importance Of Financial Literacy
• Minding Your Own Business
• Corporations & Taxes
• The Rich Invent Money 
• Work To Learn, Not For Money

Main Takeaways

Rich Dad, Poor Dad, is indeed one of the best books out there if you want to gain perspective on how the rich and the poor perceives and interact with money. It is great for those hoping to become financially independent and obtain financial freedom in a systematic, practical way. I would highly recommend it as a must-read for anyone who aspires to create and maintain wealth.

However, those who want to apply the principles explained in this book in a more actionable and practical way should explore other books by Kiyosaki. Once you read “Rich Dad, Poor Dad”, the next book to explore would be “Rich Dad’s Cashflow Quadrant”, by Robert T. Kiyosaki. You can probably skip the other books in his series as they become a bit repetitive, but I would recommend these two as a great starting point to molding your perspective on personal finance and money management.