Genres: Business, Life Advice, Self-Help
The Book in 3 Sentences
How I Discovered It
I was looking for a book to read regarding money and how to get rich, and ended up finding this book on various financial blogs. The premise of having a rich dad and a poor dad was also really intriguing to me. I also found that the book was praised as one of the first books you should read when first diving into the world of financial intelligence.
Who Should Read It?
How the Book Changed Me
My Top 3 Quotes
Introduction: Rich Dad and Poor Dad
Robert ends up working for rich dad and eventually becomes really upset because of the little pay and the hours he has to work. He demands that rich dad treat him and Mike better and asks for a higher pay. Rich dad angered Robert and Mike on purpose to teach them a few lessons. The lessons were:
Most people work for money and take that money to buy things and save the remainder. This may make you stable, but never rich. Also, working for a pension makes you financially dependent.
Rich people don't get rich off of a high salary alone. They get rich by owning things
"(As tech investor Sam Altman says, “You get truly rich by owning things that increase rapidly in value. This can be a piece of a business, real estate, natural resource, intellectual property, or other similar things. But somehow or other, you need to own equity in something, instead of just selling your time. Time only scales linearly.”)"-Shortform Notes
The main idea regarding how to become financially independent is to have your money make you money so that you don't have to work. A way to do this is to use your income to buy assets that have the potential to return more income.
Financial independence, in this book, is defined when you don't need to rely on wages and salaries because you can live forever off the income your money makes.
The steps to financial independence are:
Lesson 2: Buy Assets, Not Liabilities
In the book, Robert claims that a house is a liability. This is a rather controversial opinion and doesn't really make sense to me. His argument is that you don't get rental income on your house, but instead pay large expenses such mortgages and property taxes. Essentially, the money tied up as down payment and paying those large monthly expenses serve as a large opportunity cost.
The problem is that people need a place to live and that rent is also an expense. The writers at Shortform think a proper analysis would be to compare the cost of buying home (including down payments, annual expenses, and appreciation) with renting an identical property (including increases in rental cost that's proportional with the home value's appreciation, and the return on investment from the down payment over time.)
I think Robert means well but isn't really communicating his ideas properly. I think what he's trying to say is that your house shouldn't be your biggest investment and to only buy a house you need. Essentially, you don't need to overspend on your house.
Robert's tips for liabilities and luxuries is to buy them used whenever possible and put the saved money towards something else. His tip is to also buy luxuries from the extra cash flow generated from your assets.
Assets are investments or business that don't require your presence.
Robert also stresses to never dip into your savings or investments and to come up with creative ways for making money.
Most people have a habit of first paying their bills and then saving whatever money they have left. Rich dad payed himself first by buying assets and paid his bills as late as possible. He did this because the threat of having bill collectors come to his door was amazing motivation to find more ways to make money.
Lesson 3: Reduce Taxes Through Corporations
This chapter in the book is actual garbage because the advice isn't explained clearly enough. If you're interested in taxation, then talk to a tax attorney or consultant.
The essence of this chapter is that he believes taxes are good for no one and that the rich find ways to minimize the amount of taxes they have to pay.
Robert tells readers to form their own corporations because of these benefits:
Lesson 4: Overcome Your Mental Obstacles
Lesson 5: Keep Learning All the Time
Financial intelligence has 4 areas of expertise:
Specialists aren't often the richest people. Robert tells readers to learn broadly and master as many skills as possible. Skills like sales, marketing, communication, negotiating, investing, and people management.
Lesson 6: How to Get Started
These aren't really ways you can get started, they are more like general nuggets of wisdom.
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I'm Farshad. I'm a PhD Student in Biomedical Engineering at the University of Toronto. In my spare time, I enjoy learning and exploring new ideas in the world of science, technology, and philosophy. I'm also always exploring new ways to help myself and others live better, happier and more meaningful lives.