Rich Dad, Poor Dad

• One of the reasons the rich get richer, the poor get poorer, and the middle class struggles in debt is that the subject of money is taught at home, not in school. Most of us learn about money from our parents. So what can poor parents tell their child about money? They simply say, “Stay in school and study hard.” The child may graduate with excellent grades, but with a poor person’s financial programming and mindset.
• For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I ask, “How can I afford it?” One is a statement, and the other is a question. One lets you off the hook, and the other forces you to think.
• Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth.
• My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
• Although both men had tremendous respect for education and learning, they disagreed about what they thought was important to learn. One wanted me to study hard, earn a degree, and get a good job to earn money. He wanted me to study to become a professional, an attorney or an accountant, and to go to business school for my MBA. The other encouraged me to study to be rich, to understand how money works, and to learn how to have it work for me. “I don’t work for money!” were words he would repeat over and over. “Money works for me!”
• Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth.
• LESSON 1: THE RICH DON’T WORK FOR MONEY The poor and the middle class work for money. The rich have money work for them.
• Deep down you were terrified of taking risks. You really wanted to win, but the fear of losing was greater than the excitement of winning. Deep inside, you and only you will know you didn’t go for it. You chose to play it safe.”
• Rich dad rocked back and laughed heartily. Finally he said, “You’d best change your point of view. Stop blaming me and thinking I’m the problem. If you think I’m the problem, then you have to change me. If you realize that you’re the problem, then you can change yourself, learn something, and grow wiser. Most people want everyone else in the world to change but themselves. Let me tell you, it’s easier to change yourself than everyone else.”
• The poor and the middle class work for money. The rich have money work for them.
• You see, true learning takes energy, passion, and a burning desire. Anger is a big part of that formula, for passion is anger and love combined. When it comes to money, most people want to play it safe and feel secure. So passion does not direct them. Fear does.”
• Most people, given more money, only get into more debt.”
• He understood that every person has a weak and needy part of their soul that can be bought, and he knew that every individual also had a part of their soul that was resilient and could never be bought. It was only a question of which one was stronger.
• People’s lives are forever controlled by two emotions: fear and greed.
• So many people say, “Oh, I’m not interested in money.” Yet they’ll work at a job for eight hours a day.
• Most people do not know that it’s their emotions that are doing the thinking.
• “Unfortunately, for many people school is the end, not the beginning.”
• You will see things that other people never see. Most people never see these opportunities because they’re looking for money and security, so that’s all they get. The moment you see one opportunity, you’ll see them for the rest of your life.
• It’s not how much money you make. It’s how much money you keep.
• I am concerned that too many people are too focused on money and not on their greatest wealth, their education.
• Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.
• If you are going to build the Empire State Building, the first thing you need to do is dig a deep hole and pour a strong foundation. If you are going to build a home in the suburbs, all you need to do is pour a six- inch slab of concrete. Most people, in their drive to get rich, are trying to build an Empire State Building on a six- inch slab.
• Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
• Rule #1: You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is rule number one. It is the only rule.
• An asset puts money in my pocket. A liability takes money out of my pocket.
• The number- one expense for most people is taxes. Many people think it’s income tax, but for most Americans, their highest tax is Social Security. As an employee, it appears as if the Social Security tax combined with the Medicare tax rate is roughly 7.5 percent, but it’s really 15 percent since the employer must match the Social Security amount. In essence, it is money the employer can’t pay you. On top of that, you still have to pay income tax on the amount deducted from your wages for Social Security tax, income you never received because it went directly to Social Security through withholding.
• It is said that the fear of public speaking is a fear greater than death for most people. According to psychiatrists, the fear of public speaking is caused by the fear of ostracism, the fear of standing out, the fear of criticism, the fear of ridicule, and the fear of being an outcast. The fear of being different prevents most people from seeking new ways to solve their problems.
• Fear is the main reason that people say, “Play it safe.”
• He told us over and over again, “An intelligent person hires people who are more intelligent than he is.”
• But because of this, Mike and I couldn’t go along with the standard dogma our teachers preached, and that caused problems. Whenever the teacher said, “If you don’t get good grades, you won’t do well in the real world,” Mike and I just raised our eyebrows. When we were told to follow set procedures and not deviate from the rules, we could see how school discouraged creativity. We started to understand why our rich dad told us that schools were designed to produce good employees, instead of employers.
• When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.
• Wealth is a person’s ability to survive so many number of days forward— or, if I stopped working today, how long could I survive?
• LESSON 3: MIND YOUR OWN BUSINESS The rich focus on their asset columns while everyone else focuses on their income statements.
• Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the land and its location were the most significant factors in the success of each franchise. Basically, the person who bought the franchise was also buying the real estate under the franchise for Ray Kroc’s organization. Today, McDonald’s is the largest single owner of real estate in the world, owning even more than the Catholic church. McDonald’s owns some of the most valuable intersections and street corners in America and around the globe.
• But there is a big difference between your profession and your business. Often I ask people, “What is your business?” And they will say, “Oh, I’m a banker.” Then I ask them if they own the bank. And they usually respond, “No, I work there.” In that instance, they have confused their profession with their business. Their profession may be a banker, but they still need their own business.
• Financial struggle is often the result of people working all their lives for someone else.
• One day when I wanted a loan, my financial position did not look too good. So I added my new golf clubs, my art collection, books, electronics, Armani suits, wristwatches, shoes, and other personal effects to boost the number in the asset column. But I was turned down because I had too much investment real estate. The loan committee didn’t like that I made so much money from rent. They wanted to know why I did not have a normal job with a salary. They did not question the Armani suits, golf clubs, or art collection. Life is sometimes tough when you do not fit the standard profile.
• I cringe every time I hear someone say to me that their net worth is a million dollars or $ 100,000 dollars or whatever. One of the main reasons net worth is not accurate is simply because, the moment you begin selling your assets, you are taxed for any gains.
• So what kind of assets am I suggesting that you or your children acquire? In my world, real assets fall into the following categories:• Businesses that do not require my presence I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job.• Stocks• Bonds• Income- generating real estate• Notes (IOUs)• Royalties from intellectual property such as music, scripts, and patents• Anything else that has value, produces income or appreciates, and has a ready market
• As your cash flow grows, you can indulge in some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first.
• My rich dad just played the game smart, and he did it through corporations— the biggest secret of the rich.
• If you work for money, you give the power to you employer. If money works for you, you keep the power and control it.
• LESSON 5: THE RICH INVENT MONEY
• Often in the real world, it’s not the smart who get ahead, but the bold.
• Yet as a teacher, I recognized that it was excessive fear and self- doubt that were the greatest detractors of personal genius. It broke my heart to see students know the answers, yet lack the courage to act on the answer. Often in the real world, it’s not the smart who get ahead, but the bold.
• I’d rather be welcoming change than dreading change.
• You can play CASHFLOW Classic on the web at www.richdad.com and learn how money works.
• The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth seemingly instantaneously. An untrained mind can also create extreme poverty that can crush a family for generations.
• Sometimes you win and sometimes you learn. But have fun.
• Most people never win because they’re more afraid of losing.
• That is why I found school so silly. In school we learn that mistakes are bad, and we are punished for making them. Yet if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk. The same is true for learning to ride a bike. I still have scars on my knees, but today I can ride a bike without thinking. The same is true for getting rich.
• Winners are not afraid of losing. But losers are.
• Failure is part of the process of success. People who avoid failure also avoid success.
• LESSON 6: WORK TO LEARN— DON’T WORK FOR MONEY
• Job security meant everything to my educated dad. Learning meant everything to my rich dad.
• Job is an acronym for “Just Over Broke.”
• Instead, I recommend to young people to seek work for what they will learn, more than what they will earn.
• Often I recommend joining a network- marketing company, also called multilevel marketing, if they want to learn sales skills. Some of these companies have excellent training programs that help people get over their fear of failure and rejection, which are the main reasons people are unsuccessful. Education is more valuable than money, in the long run.
• The most important specialized skills are sales and marketing. The ability to sell— to communicate to another human being, be it a customer, employee, boss, spouse, or child— is the base skill of personal success. Communication skills such as writing, speaking, and negotiating are crucial to a life of success. These are skills I work on constantly, attending courses or buying educational resources to expand my knowledge.
• The skills of selling and marketing are difficult for most people, primarily due to their fear of rejection. The better you are at communicating, negotiating, and handling your fear of rejection, the easier life is.
• The primary difference between a rich person and a poor person is how they manage fear.
• Overcoming Fear I have never met anyone who really likes losing money. And in all my years, I have never met a rich person who has never lost money. But I have met a lot of poor people who have never lost a dime— investing, that is.
• We’re all heroes at something, and cowards at something else.
• For winners, losing inspires them. For losers, losing defeats them.
• Failure inspires winners. Failure defeats losers.
• Put a lot of your eggs in a few baskets and FOCUS: Follow One Course Until Successful.
• they aren’t busy at work or with the kids, they’re often busy watching TV, fishing, playing golf, or shopping. Yet deep down they know they are avoiding something important. That’s the most common form of laziness: laziness by staying busy.
• Rich dad forbade the words, “I can’t afford it.” In my real home, that’s all I heard. Instead, rich dad required his children to say, “How can I afford it?” He believed that the words “I can’t afford it” shut down your brain. It didn’t have to think anymore. “How can I afford it?” opened up the brain and forced it to think and search for answers.
• But most importantly, he felt the words, “I can’t afford it,” were a lie. And the human spirit knows it. “The human spirit is very, very powerful,” he would say. “It knows it can do anything.” By having a lazy mind that says, “I can’t afford it,” a war breaks out inside you. Your spirit is angry, and your lazy mind must defend its lie. The spirit is screaming, “Come on. Let’s go to the gym and work out.” And the lazy mind says, “But I’m tired. I worked really hard today.” Or the human spirit says, “I’m sick and tired of being poor. Let’s get out there and get rich.” To which the lazy mind says, “Rich people are greedy. Besides it’s too much bother. It’s not safe. I might lose money. I’m working hard enough as it is. I’ve got too much to do at work anyway. Look at what I have to do tonight. My boss wants it finished by morning.”
• Arrogant or critical people are often people with low self- esteem who are afraid of taking risks. That’s because, if you learn something new, you are then required to make mistakes in order to fully understand what you have learned.
• Listening is more important than talking. If that were not true, God would not have given us two ears and only one mouth.
• I am always shocked at people who buy stocks or real estate, but never invest in their greatest asset, their mind.
• would say that one of the hardest things about wealth- building is to be true to yourself and to be willing to not go along with the crowd. This is because, in the market, it is usually the crowd that shows up late that is slaughtered. If a great deal is on the front page, it’s too late in most instances. Look for a new deal. As we used to say as surfers: “There is always another wave.” People who hurry and catch a wave late usually are the ones who wipe out.
• When it comes to money, the masses generally have one basic formula they learned in school and it’s this: Work for money.
• If you cannot get control of yourself, do not try to get rich.
• When you come up short, let the pressure build and don’t dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money, and then pay your bills. You will have increased your ability to make more money as well as your financial intelligence.
• Poor people have poor habits. A common bad habit is innocently called “dipping into savings.” The rich know that savings are only used to create more money, not to pay bills.
• Too often today, we focus on borrowing money to get the things we want instead of focusing on creating money. One is easier in the short term, but harder in the long term. It’s a bad habit that we as individuals, and as a nation, have gotten into. Remember, the easy road often becomes hard, and the hard road often becomes easy.
• Copying or emulating heroes is true power learning.
• If I could leave one single idea with you, it is that idea. Whenever you feel short or in need of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, or friendship. I know it is often the last thing a person may want to do, but it has always worked for me. I trust that the principle of reciprocity is true, and I give what I want. I want money, so I give money, and it comes back in multiples. I want sales, so I help someone else sell something, and sales come to me. I want contacts, and I help someone else get contacts. Like magic, contacts come to me. I heard a saying years ago that went: “God does not need to receive, but humans need to give.”
• Look in the right places. A neighbor bought a condominium for $ 100,000. I bought the identical condo next door for $ 50,000. He told me he’s waiting for the price to go up. I told him that profit is made when you buy, not when you sell. He shopped with a real estate broker who owns no property of her own. I shopped at the foreclosure auction. I paid $ 500 for a class on how to do this. My neighbor thought that the $ 500 for a real estate investment class was too expensive. He said he could not afford the money, or the time. So he waits for the price to go up.
• The Three Incomes In the world of accounting, there are three different types of income: 1. Ordinary earned 2. Portfolio 3. Passive When my poor dad said to me, “Go to school, get good grades, and find a safe secure job,” he was recommending I work for earned income. When my rich dad said, “The rich don’t work for money. They have their money work for them,” he was talking about passive income and portfolio income. Passive income, in most cases, is income derived from real estate investments. Portfolio income is income derived from paper assets such as stocks and bonds. Portfolio income is the income that makes Bill Gates the richest man in the world, not earned income.
• You and your children’s future will be determined by choices you make today, not tomorrow.
• Why do so many kids hate school?• Why do so few kids like school?• Why are many highly educated people not successful in the real world?• Does school prepare you for the real world?• Why did I hate school but love learning?• Why are most schoolteachers poor?• Why do schools teach us little about money?

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