Money doesn’t buy happiness, right?
It’s a lie many poor people tell themselves (and everyone who will listen).
Wanna know the truth?
Money may not buy happiness outright, but it will allow you the freedom to do things that DO bring happiness into your life. Additionally, not having to stress about money or how you are going to pay your bills or repay your debt is incredibly liberating!
No matter how you look at it, you NEED money.
So in this post, I’m going to be sharing 5 important lessons from Rich Dad Poor Dad, the book by Robert Kiyosaki. Through this book summary, I hope you will be able to become more financially literate and get on the path to becoming financially free.
Lesson 1: Work to Learn, Don’t Work For Money
This is one of my most important lessons from Rich Dad Poor Dad and something I use all the time.
This is especially powerful for young people.
When you are young, use the jobs you take on as opportunities to get paid to learn new skills. An example would be to take a sales job early in your career. You might hate it, but it will teach you how to sell as well as help you tremendously improve your social skills.
Those skills will become invaluable later on in your life!
I love the example Robert shares in his book:
He was doing an interview with a journalist, who happened to be writing her own books. However, as she shared with him, her writing career didn’t seem to be going anywhere at all. It was painful for her to pour all of her effort into writing and not see any results.
And so, she asked Robert for advice.
He told her this:
What he recommended her to do was to take up a job in marketing or sales, so that she could acquire the skills needed to market her books. He pointed towards her notes for the interview where she had written down “Robert Kiyosaki: best-selling author”. She felt outraged at the advice, even though it’s solid advice.

Specialization vs Synergy of Skills
Let’s dive a bit deeper:
The journalist was working at the newspaper so that she could further hone her writing skills. This seems like a good idea, because it would allow her to become an even better writer and have books that are amazingly well written. It’s an example of specializing.
Robert’s advice is about what I call the synergy of skills.
The idea here is that you are just 1 skill away from the next big leap forward in your life!
In the case of the journalist, the skill she needed was to learn how to sell. Her writing was already pretty good, but she didn’t know how to get people to pick up the book and make sales. And for that reason she never got her writing career going.
Sales and marketing would fill the gap.
All she needed was to pick up that 1 extra skill that synergizes well with her current ones. The same goes for you and your goals. I do not know what skill you need to pick up to reach your goals, but once you find out and learn that skill, your world will change!
Lesson 2: Why You Need to Be Financially Literate!
If there is 1 keyword for Rich Dad Poor Dad, it would be “Financial Literacy”.
In plain English:
Being financially literate means understanding money and how it works. It is the ability to understand at least the basics of financial statements. But most importantly, financial literacy is about understanding how your decisions affect your life financially.
This is what I hate about schools.
Schools teach kids math, languages, biology, history and science. But even though they do have economics, schools do not teach children how money works and how they can make it work for them. And crucially, this financial education is what kids need way more than anything else.
This causes so much pain for millions of people…
Schools don’t teach kids about money, so how do they get their financial education?
Their parents.
However, if a parent doesn’t have any financial education themselves, what can they really teach their kids about money?
“Work hard and get a good job” is the usual advice.
Why Most Poor People Are Poor
Most of them are poor or middle class, because they were never thought about money.
- It’s not the economy.
- It’s not the government.
- It’s not the rich.
- It’s not circumstances.
The main reason for poverty (in developed countries at least) is not knowing how to play the game of money. Yes, I see it as a game and so do most rich people. Why else do you think people will continue working when they have enough money to last them a dozen generations?
That’s why I love this book.
In order to become financially free, you need to learn these lessons from Rich Dad Poor Dad. The only way to go from poor to middle class and from middle class to rich is to learn the game of money and play it well.
In short, you need knowledge of 4 things:
- Accounting: Understanding numbers, the balance sheet and income statements. Accounting is the language of money, so you better learn at least the basics of it.
- Investing: This is the art and the science of money making money. The rich don’t work for money, a large part of their wealth comes from investing and investing well.
- Markets: It’s all about supply and demand. Understanding how markets work and the factors that affect them will allow you to stay ahead of the curve.
- Law: Of course you want to make money legally. Understanding law (for example tax law) will allow you to keep WAY more of the money you make.
While Rich Dad Poor Dad teaches these concepts, it’s only the beginning of your financial education, not its entirety.
Unfortunately though…
Covering each of those topics would take dozens, if not hundreds of articles. So I can’t go into the details about them here. Take a note of these 4 areas of investing and look for some more information after you finish this article. In the meanwhile I will tell you the single most important thing about money and that’s my 3rd (and most important) lesson from Rich Dad Poor Dad.
Lesson 3: The Rich Don’t Work For Money, Money Works for Them
Here’s the paradoxical fact about getting rich:
Getting rich is NOT about how much money you make!
If you think making more money will make you rich, you’d be wrong! Floyd Mayweather, Michael Jackson and 50 Cent are just some examples of celebrities who have gotten into huge financial issues. And that is despite the fact that they have earned millions (tens of millions even) per year!
Again, financial literacy!
Poor & middle class people are poor because of their financial decisions.
It is how you spend your money that determines your financial future! If you spend your money well, you will become rich. If you spend your money foolishly, you’ll be poor. If you spend it like most people do, you might look rich, but you’ll be struggling with debt your entire life!
What Cashflow is and How to Make it Work for You
Take a look at the image below:
Let me explain the graphic:
What you’re seeing in the image above are the typical ways in which people earn, and spend their money. The red arrows represent poor people, the orange arrows are for the middle class and the rich are illustrated by the green arrows.
As you can see there are 4 boxes in this graphic:
- Income: This is pretty straightforward. Arrows that go into the “Income” box represent money coming into the bank account every month.
- Expenses: This is pretty self explanatory as well.
- Assets: We don’t follow the dictionary definition of an asset here. Rather, as rich dad describes it: “An asset is something that puts money in my pocket”.
- Liabilities: The opposite of an asset. Again the definition of a liability is “Something that takes money out of my pocket”.
I’ll explain the arrows in a bit, but first let’s examine 3 & 4.
Assets vs Liabilities
Before we go into the other lessons from Rich Dad Poor Dad, you NEED to know this 1 difference.
I’ll put it simply:
If you understand the difference between assets & liabilities and then focus on buying assets, you will become financially free, period. Obviously, it is not going to happen overnight, but this will put you on the right path.
The problem is that most people don’t know the difference…
Wanna do a quick test?
Just answer if the following are assets or liabilities:
- Your Home
- Savings
- Stocks
- A rental property
- Your car
- Loans
Just think about the criteria as you answer them.
Got them done?
Then let’s take a look at the answers:
First and foremost, your house is NOT an asset, even though most people think so. Whether you’re a homeowner or you rent, your home takes money out of your pocket every month that you cannot invest. Your home is a liability. However, if you rent your house, that means that your home is an asset for your landlord since they get money from you every month.
Savings is a tricky one at the moment.
Normally, saving money is definitely a good thing, and you should have an emergency fund saved up. However, I only hesitantly put it in the asset column. At the moment of writing this, interest on most savings accounts is (nearly) 0, so you’re not actually getting money for having savings.
Stocks is pretty forward, right?
With stocks, you own a piece of a company, and you usually get a dividend from them. In other words, you get paid a part of the profits of the company. This is in addition to any value increase in the company’s worth (and thus share price). It’s a clear asset.
A rental property is when you own a piece of real estate and rent it out to someone else. Every month you get paid and get paid more than the mortgage expenses, making this an obvious asset.
Next up, your car.
This is a bit of a tricky question because it can be both. Generally speaking, your car is a liability. You need to pay insurance, gas, taxes, etc. every month. However, if you use that car for income, for example by being an Uber driver or renting it out, then it can be an asset.
Finally loans.
Loans can fall into both categories, but it’s a bit more straightforward.
If you are borrowing money (mortgage, car loan, credit card debt, etc.) then this is a liability. If on the other hand, you lend out your money as an investor (to a credible party), you receive interest and thus that loan is an asset for you.
Got them all right?
Then you’re well on your way!
Your Path to Financial Independence
Now that we covered the difference between assets and liabilities, let’s look at the graph again:
Let’s start with the red arrows.
They represent a poor person or a youngling who hasn’t yet left their parents’ home. They have income coming from a job, but don’t have a lot of liabilities yet. They get the money, they spend it and then it’s gone. It’s a bit simplified since everyone has some liabilities, but this is the general idea.
Let’s move on to the orange arrows.
This represents the middle class.
As their income grows, most people start buying liabilities (often without knowing they are liabilities). A (bigger) house, a nicer car, luxuries in the house paid for with credit cards and things like that. This is represented by the arrow going into the liabilities box. These liabilities then create monthly expenses (mortgage, insurance, credit card payments, etc.) and so the money is gone.
Finally, let’s examine what the rich do:
The first thing to note is that there is no arrow coming in from a job.
Of course this is a simplification as well, since many rich people do work. However, the thing to notice instead is the arrow that goes from the “Assets” box to the “Income” box. In other words, the rich make most of their money from their investments. Think about dividends, capital gains, real estate, outstanding loans and things like that.
The next thing to notice is that there is an arrow that goes right back to the assets box.
When the rich make money (from a job or otherwise), the first thing they will do is invest that money into assets!
Instead of getting a bigger house to look rich, they focus on building up their assets and thus become rich. They will buy luxuries and liabilities as well, but they buy them after building up their assets so that the passive income from their investments pays for their liabilities!
How to Get Started
You won’t find the concrete answer in Rich Dad Poor Dad.
Instead, I’ll give it to you:
For most people, the way to go about it is to first start saving and investing 15% (preferably more) of your income. This should be the first thing to do after you get your income, NOT the last! You may find this hard to do due to the present bias. A great workaround would be to open an investment account and tell HR to deposit 15% of your salary account, so that you don’t even see the money in your main one.
So that’s step 1.
Step two is to open up a stock brokerage account.
If you’re not an expert in investing, your best bet would be a broad market index. For example the Vanguard’s S&P 500 ETF. When you invest in this ETF, you own a little bit of the 500 largest companies in the United States. So this is a way safer way to invest than picking individual stocks.
Of course, if you do proper research, investing in individual stocks can yield better results, but it’s also a lot more risky.
Note: Open up a Roth IRA if you’re in the USA or an ISA if you are in the UK. These accounts offer some significant tax benefits. If you are somewhere else in the world, see if there are any tax efficient structures in your country.
And that’s pretty much it.
As your wealth grows, you can look at real estate or REITS (Real Estate Investment Trusts) as well, plus other investment vehicles. Of course do your due diligence before making any kind of investment.
Keep on investing to grow your income from your asset column!
Lesson 4: Use Your Emotions to Think, Not the Other Way Around
And I’ll be the first to admit that this is not an easy thing to do.
We each have what we call the “Lizard Brain”.
This is the part of our brains that stems from millions of years of evolution. When you have a gut feeling or an instinct, then it’s coming from this part of your brain. It’s also responsible for your unconscious thinking as well as, you guessed it, your emotions.
Here’s what rich dad told Robert:
Robert’s rich dad told him and his best friend that most people’s lives are run by 2 emotions:
Fear and desire.
First, people are driven by fear. They fear not being able to provide for their family, not being able to do nice things, not having enough to pay rent, etc. This fear pushes them out the door to look for a job, start a business or look for opportunities for themselves.
And then desire kicks welcomes them.
When the paycheck arrives, that focus shifts to thinking about all of the things that money can buy. They spend it on whatever, but that doesn’t satisfy the desire. Once we have one thing, we want something better or we want more. And so that’s another motivation for people to work.
But, after buying these toys, fear sets in again.
After they bought their toys (car, motor, house, etc.) not only are they broke again, they now also have liabilities. Fear kicks in because they now have all of these monthly payments that they need to make. And the cycle repeats itself. And for many people, the cycle repeats itself for their entire lives! This is what Robert refers to as the rat race.
The endless cycle of: get to work, pay the bills, get to work, pay the bills.
It’s tempting too.
However, it is important to learn to use your emotions to think, rather than “think” with your emotions.
In other words:
Pause for a moment to think. Learn to control your impulses. Ask questions. Ask yourself how the action you want to take contributes to your life and your goals. We often make decisions purely on emotion and then either justify them rationally afterwards or regret them.
Let’s be honest:
It might feel like a pain to invest right now, because you’re giving up your spending now. That desire kicks in and that emotion tries to persuade you to just splurge on whatever expense you have in mind at the moment. If you can control those urges and emotions, you will do well in life.
Lesson 5: Question Your Excuses
There is a really short section of Rich Dad Poor Dad that have been an important lesson for me.
Literally just a few lines, but with a powerful message.
In the book it reads:
“My poor dad would say ‘I can’t afford it.'”
“My rich dad would say ‘How CAN I afford it?'”
It’s such a huge difference in mindset!
When you tell yourself that you cannot afford it, or that you cannot do it, you let yourself off the hook. It closes off your mind and it lets you not think about the issue any more. It’s a way of dismissing the issue entirely because it’s “out of my hands”.
But on the other hand:
If you ask yourself how you can afford it, how you can do it, or what you can do instead, those are things that put your mind to work. Instead of dismissing the issue and accepting that it is “impossible” you are now focused on the solution, rather than the problem.
Which do you think will be more effective for you?
Exactly!
Exercising your physical muscles regularly dramatically increases your chances for great health. Exercising your mental muscles regularly dramatically increases your chances for great wealth. Not to mention happiness and success at whatever you decide to do with your life.
Putting it All Together
If there is one takeaway from Rich Dad Poor Dad, it is to become financially literate.
The rich are getting richer.
However, the key takeaway here is that the rich get richer because they understand money. They know the rules of the game and they know how to play the game well. Moreover, they teach their kids these lessons as well. You need to learn the rules as well if you are to have any chances of becoming rich.
Simple steps go a long way.
Start with your education and go from there. Start saving every month, cut out liabilities as much as possible and invest whatever you can. Do that and you will soon start to see your income and your wealth rising!
To continue:
Get your own copy of Rich Dad Poor Dad now, because this book summary if in no way a substitute for the book itself. Rich Dad Poor Dad holds many more important lessons and teachings for you! Also be sure to check out the Rich Dad company, since they have many more resources (free and paid) to help you on your financial journey!
And don’t forget to share this with people that need the financial education! 🙂