The Seven Core Principles Taught in “Rich Dad Poor Dad”
One of the most well-known personal finance books of all time is Rich Dad Poor Dad by Robert Kiyosaki.
Here are the seven core principles taught in the book.
1. The rich don’t trade time for money.
Rich people acquire assets that make money for them so they don’t have to trade their time for a paycheck.
Initially, most of us start out with no resources, no money, and no connections, so we likely have to trade time for money when we’re starting out. The way to stop trading time for money is to use paychecks to buy assets like real estate, stocks, bonds, websites, and businesses.
As you accumulate more assets over time, you will become less dependent on a job for an income stream. Eventually you may reach a point where your assets are able to earn so much for you that you no longer need to trade your time for money.
2. The rich acquire assets while the poor and middle class acquire liabilities that they think are assets.
Rich people acquire stocks, bonds, real estate, websites, businesses, and other assets while the poor and middle class acquire liabilities like houses, cars, and most material possessions.
Over time, assets tend to increase in value or pay out dividends. Conversely, liabilities tend to decrease in value and require monthly payments.
Assets put money in your pockets. Liabilities take money out of your pockets. You should acquire assets and avoid liabilities as much as possible.
3. The rich focus on their assets while everyone else focuses on their income statement.
Rich people focus on acquiring more and more assets over time. The more they acquire, the larger their income-producing streams grow, and the more freedom they gain over their time because they become less dependent on a traditional job for income.
Conversely, most people focus purely on increasing their income while never actually using that income to buy income-producing assets. This leaves them dependent on a job to earn income to pay their bills.
4. The rich always focus on increasing their financial IQ.
Rich people understand how markets work, the role that human psychology plays in money management, and how compound interest works. By constantly increasing their financial IQ, they give themselves an advantage in life.
The rich know they should avoid selling off their assets during market downturns, the importance of rebalancing their portfolios, and the importance of remaining invested for decades, not just months or years.
5. The rich seize opportunities to invent money.
Rich people don’t just acquire assets; they also build assets. They create businesses, websites, and products. They find ways to provide services, seek out side hustles, and keep their eyes out for opportunities to attract income.
6. The rich work to learn and not for job security.
Often the richest people are the most voracious learners in their free time. During the time when they do need a day job, they use that job to increase their knowledge and skill set; they don’t merely report to an office for eight hours per day.
By constantly learning, they build up their marketable skills, which allows them to demand a higher income for their work.
7. The rich avoid the most common obstacles that prevent wealth.
These obstacles include laziness, cynicism, fear, bad habits, and hanging out with complainers. By avoiding these common obstacles, rich people are able to increase their probability for accumulating wealth.