Best ideas from Robert Kiyosaki’s “Rich Dad, Poor Dad” Book

Robert Kiyosaki

We decided to inaugurate our blog with a review of the main concepts from Robert Kiyosaki’s bestseller book “Rich Dad, Poor Dad”. The reason for this is that most of the real estate investors consider this book as the one that changed their way of thinking about personal finances and the one that motivated them to start investing in real estate. I can also say that it totally changed my point of view about personal finances and made me understand how important assets and cash-flows are.

Here you have Kiyosaki’s Rich Dad, Poor Dad take home messages:

1. Assets Vs Liabilities

When I was younger, I thought my home, my car, and everything I bought for myself were all assets. Not until, Robert Kiyosaki taught me the real meaning of assets and liabilities.

According to Kiyosaki, your house is not an asset – even your car. .
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Your house is not an asset because you have to pay for it and it does not put money in your pocket. Your car is also not your asset because it doesn’t give you an income and its value decreases.

A house is only an asset if it puts money into your pocket every month- like for example a rental property.

Liabilities are things that get money out from your pocket. Therefore, if you have to pay for the mortgages and the car loans, your car and your house are both your liabilities.

Therefore, assets put money in your pocket every month (cash-flow+) and liabilities take money out of your pocket every month (cash-flow-)

2. Good Debt and Bad Debt

Aside from Assets and Liabilities, Robert Kiyosaki also talked about good debt and bad debt on his “Rich Dad, Poor Dad” book.

Good debts are money that you owed and used into something that will not only pay off the debt but will also give you a little more income. Some examples of good debts are money used for investments like real estate or for business creation.

On the other hand, bad debts are money that was owed in buying things that you don’t really need. It is the money you use to buy liabilities.

Then, using debt in buying assets is good and can make the most out of the money. However, using debt to buy liabilities is bad because it takes out money from your pocket without anything in return.

3. Live Above Your Means

Robert Kiyosaki doesn’t believe in living under your means. On the contrary, he believes that in order to live your life to the fullest, you need to live “above your means”.

In order to live above your means, Kiyosaki suggested buying assets to pay for your liabilities.

4. Savers are Losers, not risking is the Biggest Risk of All

This goes against most people are trying to tell you- SAVE MONEY.

The value of money drops each year due to inflation rate.  Nowadays our inflation is about 4% but CDs offer less than 2% and bank accounts 0.X% so your net “gain” is always negative. If you kept your money in your bank for 10 years, you might have earned a couple of $$ from the bank’s interest, but the bottom line is, the value of your money is 50% of its original value.

5. Three Types of Income

Robert Kiyosaki also talked about the three types of income – earned, portfolio, and passive income. He said that Earned income is the most common type of income in the US and the most heavily taxed. Clearly, earned income is the type of income you have if you have a job. Portfolio income on the other hand, comes from capital gains from investments and other businesses. Finally, Passive income, comes regularly from something that you don’t have to work for (assets) and is the less taxed class of income.

Our goal is to make passive income as much as possible.

6. Life’s Four Quarters

Robert Kiyosaki divided your financial life in four quarters: 25 to 35 years old (first quarter), 35 to 45 years old (second quarter), 45 to 55 years old (third quarter), and 55 – 65 years old (fourth quarter). If you follow the standard advice of hard work, save money and invest on a 401K, you will just be old by the time you can retire, if you can actually do it. Our goal should be conquer life in the first two quarters so you can still have time to enjoy and rest on your last 2 quarters.

7. The Cash-flow Quadrant

Robert Kiyosaki mentioned that there are four types of people in the world: The Employees, The Self Employed People, The Big Business Owners, and The Investors.

Though you can make money in all these quadrants, the employees and the self employed people pay higher taxes. Society push us to become employees or self-employed.

Kiyosaki recommends moving from being an employee to becoming an entrepreneur and then a business owner and/or investor, eventually.

“Rich Dad, Poor Dad” and It’s Relevance in Real Estate Investments

With all those points I listed above, I can say that Robert Kiyosaki’s “Rich Dad, Poor Dad” is a great resource for real estate investors, especially those who are just starting up. Robert Kiyosaki provides the basic philosophy of investing and personal finance. Invest in assets that generate passive income. That is the perfect definition for rental properties.