Rich Dad Poor Dad: The Best Summary

5 min read

One of the first personal finance books I ever read was Rich Dad Poor Dad by Robert Kiyosaki. At its core, it’s a book about:

(1) The principles you must understand to build wealth.

(2) The various ways that rich people think and act differently than everyone else.

I frequently recommend this book to beginners in personal finance because it doesn’t touch on any complicated investment tactics or complex strategies; rather, it explains the simple and timeless principles that anyone can implement to become rich.

For those who aren’t interested in reading the entire book, here is a summary of the main ideas and lessons taught in Rich Dad Poor Dad.

The rich don’t trade time for money. They acquire assets that make money for them.

The central idea that you must understand to build wealth is that you need to own assets that earn money for you while you sleep.

Of course, everyone must trade their time for money when they first start out on their financial journey, but over time you should seek to use that income to buy assets.

An asset is anything that tends to increase in value over time or pays you money simply for owning it. Some examples are real estate, stocks, bonds, websites, and businesses.

Without assets, you are completely dependent on a day job to earn income.

Naval Ravikant once echoed similar advice:

“In almost any salaried job, even at one that’s paying a lot per hour like a lawyer, or a doctor, you’re still putting in the hours, and every hour you get paid. So, what that means is when you’re sleeping, you’re not earning. When you’re retired, you’re not earning. When you’re on vacation, you’re not earning…”

Over time, the more assets you own that produce money for you, the less dependent you become on a day job to earn an income. Eventually you’ll reach a point where your assets can cover most or all of your living expenses. At that point, you are truly rich.

So, build and buy things that make money for you while you sleep. This is the first principle you must understand to build wealth.

Related: Build a Workforce. Don’t Build a Workload.

How much money you keep matters more than how much money you make.

It’s important to understand that a high income alone cannot make you rich. It can certainly help, but if you constantly trade your time for a salary and never actually acquire assets, you’ll always be dependent on that salary to pay the bills.

A lawyer who earns $300k per year after taxes and spends $300k per year on their lifestyle has no ability to walk away from their job and continue to earn money. Without owning things that earn money for them in their sleep, they’re income-rich and asset-poor.

And while a high income can be used to buy a nice car and a new home, if you never use any of that income to buy assets then you are no closer to being financially free.

Truly rich people use money to buy freedom, rather than material goods. Author and blogger J.L. Collins also mentions this in The Simple Path to Wealth:

“There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.”

Thomas Stanley and William Danko discovered something similar in their research on millionaire households in the U.S. – people who tend to buy luxurious houses and cars typically don’t have much wealth in terms of assets.

From The Millionaire Next Door:

“Many people who live in expensive homes and drive luxury cars do not actually have much wealth.”

A high income can be a huge advantage for accumulating wealth, but only if you spend that income on the right things.

Related: Do You Need a High Income to Achieve Financial Independence?

Getting Rich Isn’t the Same as Staying Rich

Once you get rich, you still have to work to stay rich. Many people who accumulate wealth end up decimating their wealth through lifestyle inflation and poor money management decisions.

Ben Carlson wrote about this exact topic in a post titled Sustaining Wealth is Harder Than Getting Rich: 

“Getting rich is not the same thing as staying rich. There are plenty of ways to get rich — start a business, save & invest wisely, inherit money, get lucky, etc. But staying rich involves just a few simple things — self-awareness, modesty, and the ability to delay gratification with a portion of your capital.”

He points out that lifestyle inflation is the most common killer of wealth:

“There is a huge difference between making lots of money and being rich. Income is not the same thing as wealth. Those who earn a high income give themselves a better chance of becoming rich but there is far more temptation to inject extreme lifestyle inflation into the mix when you earn a bigger paycheck.”

Persistence and consistency can help you become rich. Humility and gratitude can help you stay rich.

Through resisting the urge to flaunt your wealth and through practicing gratitude for the things you have, you increase the odds that you keep the wealth you have accumulated.

As financial writer Morgan Housel once explained:

“Wealth, in fact, is what you don’t see. It’s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It’s assets in the bank that haven’t yet been converted into the stuff you see.”

Once you build wealth, you need to make sure you keep it. Here are a few helpful resources for doing so:

Trim: A free app that automatically identifies all of your monthly recurring bills, provides you with a summary of how much you’re paying, and offers to cancel or negotiate a lower price for each service.

Personal Capital: A free financial app that tracks your investments and cash flow, and helps you minimize how much you pay in investment fees.

M1 Finance: A site that allows you to build a custom portfolio of stocks for free without paying any trading fees.

The Rich Seize Opportunities to Invent Money

The rich are always looking for ways to create money. This includes creating businesses, websites, products, and finding ways to provide services, seek out side hustles, and attract income.

The Internet has massively broadened the ability for people to earn income from their unique knowledge. Since the internet connects every human to every other human on the planet, this means you can find your audience for your product, or your talent, and skill no matter how far away they are.

I personally share my unique knowledge on topics on a variety of websites. Then, through monetizing my websites with ads, affiliate links, and my own products, I have been able to create a full-time income for myself. Here are a few examples:

Four Pillar Freedom: I share unique insights on personal finance.

Collecting Wisdom: I curate and share my favorite personal finance articles from around the web.

Statology: I share my knowledge of statistics.

Wander Cincinnati: I share unique places to visit and things to do around my hometown of Cincinnati.

By creating these websites and sharing my unique knowledge on various topics, I have created several online income streams for myself and I’ve gained the freedom to be my own boss.

There are absolutely no barriers to creating a website for anyone with an internet connection and I believe that creating one and monetizing it is one of the best opportunities for building wealth independently. Check out this quick guide if you’re interested in starting one yourself.

Besides creating and monetizing websites, there are tons of ways to earn money in unique ways outside of a traditional day job. Here are a few examples:

• Kenzi earns a full-time income purely from freelance writing.
• Dave earns passive income through selling graphic designs online.
• Kevin does a variety of side hustles like dogsitting, scooter charging, and food delivery to earn thousands of extra dollars each month.

People who get rich use their specific skills and knowledge to generate income streams out of thin air.

You can pick up a copy of Rich Dad Poor Dad by Robert Kiyosaki here.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.