Rich Dad Poor Dad was my first book on financial education. It is aimed at beginners and compares how rich and poor people handle money.

If I were to summarize it: the rich acquire assets and make money work for them; the middle class buys liabilities thinking they are assets.

The book helped me understand the difference between the financial flows of people who grow wealth and those who lose ground.

If you do not have financial proficiency, money will only slip through your hands faster. As the book rightly warns: “If you find you have dug yourself into a hole… stop digging.”

Points on financial education

The book proposes a different approach to allocating resources. These are the points that stayed with me:

1. Mindset and Problem Solving

Poverty can also be a way of thinking about money.

“There is a difference between being poor and being broke. Being broke is temporary. Poverty is eternal.”

The poor mind says: “I can’t afford this”, shutting down the thought process. The mind focused on wealth building asks: “How can I afford this?”, forcing the brain to search for solutions, create income streams, and optimize processes.

2. Risk and Wealth Management

The size of a paycheck matters less than how much you can keep over time. The proposal is to grow the asset column, what puts money in your pocket, before increasing expenses.

“The greatest losses are from missed opportunities. If all your money is tied up in the house you live in, you may be forced to work harder, because all your money continues to go out in the expense column instead of adding to the asset column.”

The book’s rule of business is: your profits are made when you buy, not when you sell. Many people are afraid to invest, but “risk comes from not knowing what you are doing”.

3. People and Systems Management

The growth of any project runs into ego. Many mid-level professionals stagnate because they can only manage people they consider inferior to themselves.

A business builder needs to manage and pay people who are smarter than them in technical areas. Large companies do this through boards of directors. The book suggests building a similar network to look after your wealth.

Putting the idea into practice

To apply Kiyosaki’s philosophy, the goal is to convert active income, your labor, into passive and portfolio income as quickly as possible.

Link to buy the book: Get the book here

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Next reading: The Richest Man in Babylon