Rich Dad, Poor Dad Summary

Understand the difference between an asset and a liability; and grow your income-generating assets' column.

“If you find you have dug yourself into a hole... stop digging.”

Wealth measures how much money your money is making and, therefore, your financial survivability.

10 Lessons From RICH DAD, POOR DAD.

PAY YOURSELF FIRST

LEARN TO LISTEN

1. Theory One

Money is the cause of all sufferings

2. Theory Two

Lack of money is the cause of all sufferings.

Assets

The things which increase your money.

Liabilities

The things which reduce your money.

Poor

People whose income gets spend on basic expenditure.

Middle class

People whose income gets spend on luxury things and unnecessary shopping.

Real rich

People whose income does not get spend, but they invest a good part of their income on money generating assets.

If you wanna know the key points from the book, the following ideas are for you

The fear is the main cause of working for money. Rich people make money work for them. Job is a short term solution to a long term problem. Emotions should not control your thinking. Money is illusion. Money is not real.

It’s how much money you keep not how much you make. You need to be a financially literate. Master financial literature. Accounting is very important even though it’s boring. Account analysis is an important skill. Understanding the difference between asset and liability is crucial. Do know the difference! Keep it super simple. Buy an asset not a liability. You have to understand the numbers. Rich acquire assets. Asset is what puts money to your pocket. In financial reporting the story is important. Cash flow tells the story how the money is spending.

(Continued in next idea..)

Fear and greed can drive financially ignorant people to make irrational decisions.

If you have money, you are likely to focus on all the new things it can buy (greed). If you don't have it, you worry you might never have enough (fear).

People who are ignorant about how to manage their finances are especially prone to letting these emotions drive their decision-making.

By building up your financial knowledge about things like investments, risk and debt, you can counter these emotions, and place you in a better position to make rational decisions.

Despite being vital for both personal and societal prosperity, we receive no training in financial intelligence.

Being rich is not about being talented or capable. The world is full of such people, and most of them are poor. What they lack, is financial intelligence, an aptitude for financial subjects like investing, accounting etc.

Sadly, we aren't raised with this intelligence. Our schooling doesn't cover financial intelligence amongst the myriad of concepts we learn.

Since society has left us poorly equipped in terms of financial knowledge, it is up to the individual to educate himself.

Financial self-education and a realistic appraisal of finances are the building blocks of growing wealthy.

Earlier you start at building your personal wealth, the better. If you begin at 20, you're far more likely to become rich, than at 30.

Set financial goals based on a realistic appraisal of finances. A good look at the income, and expenses helps you plan your future accordingly. Coupled with financial education, there's a good change you'll become wealthy one day.

There are clever methods to break free from the painful cycle of working for others your entire life while failing to preserve anything.

"Money without financial literacy is no money"

Making money and keeping money are two different things. Never confuse the two . Remember the athlete who made millions at 24 but ended up sleeping under a bridge ten years later?

Learning can increase your knowledge and equip you with unique talents to help you advance in your career.

1. Management of cash flow
2. Management of systems
3. Management of people

Your ability to sell - to communicate and position your strengths - directly impacts your success.

Rich people work to learn things and those things they learn can easily be applied to make money in the future, over and over again. It is better when you actually learn things in practice Being rich dor not Being rich has very little connection to material possession

An asset is something which can generate income, whereas a liability is anything that has costs. Your house is a liability as it may have cash value, but it doesn't bring you any money unless you rent it You can become rich by accumulating assets that can generate value example, a blog, local online shop etc..

An individual should be spending their spare time investing as much as they can from their wages in assets, not spending them.

10 of 10 rule states that one should not spend more than 10% of its net worth on house and not to spend more than 10% of its house value on cars like liabilities. If this is followed by person then he/she will probably not face any money problems.

Poor mentality

Poor and middle class firstly spend their incomes on the needs and liabilities. If something left after goes to the investment

Rich mentality

Rich people firstly invest a part of their income and then after spend the left out for need and luxuries.

This thing make a huge difference.

Poor and middle class people remain poor or they are one step away from poverty because they depend on single source of income while the rich mindset people create multiple income streams. They use their available resources to create one income and after setting that works to make other income stream. This cycle repeats that's why they richer by time

People's lives are forever controlled by two emotions - fear and greed. While fulfilling our greed we often opt for a job to earn plenty of money, which is eventually a short term solution to a long term problem. 

It's just like the picture of a donkey dragging a cart with its owner dangling a carrot just in front of its nose. The donkey's owner may be going where he wants to, but the donkey is chasing an ILLUSION. Tomorrow there'll only be another carrot for the donkey.