About The “Lessons From” Series
The “Lessons From” series are bite-sized summaries of books about financial literacy for parents raising money-smart kids.
Today with Summary #4, we continue the series on a book called Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki, Sharon L. Lechter. (Link to Summary #3)
The first few chapters were foundational, so we focused on them individually in each of the previous summaries. For the next chapters in the book, we are going to provide a higher level summary. In the author's own words...
Chapter 3 – LESSON 3: MIND YOUR OWN BUSINESS
About the poor and the middle class:
- ...most people work for everyone but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage.
- When downsizing became the “in” thing to do, millions of workers found out their largest so-called asset, their home, was eating them alive. ... What they thought were assets could not help them survive in a time of financial crisis.
- Reminder from Summary #3 on what an asset is: assets put money in your pocket. Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
About the rich:
- The rich focus on their asset columns, while everyone else focuses on their income statements.
- Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home.
- As your cash flow grows, you can indulge in some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. ... Buying a luxury on credit often causes a person to eventually resent that luxury because the debt becomes a financial burden.
- ... you are now ready to learn the biggest secret of the rich—the secret that puts the rich way ahead of the pack.
Chapter 4 – LESSON 4: THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS
- ... rich dad fashioned himself as an expert on the history of taxes. Rich dad explained to Mike and me that originally, in England and America, there were no taxes. ... Although it was intended to punish the rich, in reality it wound up punishing the very people who voted for it, the poor and middle class. ... The problem was that the government’s appetite for money was so great that taxes soon needed to be levied on the middle class, and from there it kept trickling down.
- The rich created the corporation as a vehicle to limit their risk... It is the knowledge of the legal corporate structure that really gives the rich a vast advantage over the poor and the middle class. A corporation is merely a legal document that creates a legal body without a soul. Using it, the wealth of the rich was once again protected. It was popular because the income-tax rate of a corporation is less than the individual income-tax rates.
- Every time people try to punish the rich, the rich don’t simply comply. They react. They have the money, power, and intent to change things. They don’t just sit there and voluntarily pay more taxes. Instead, they search for ways to minimize their tax burden. They hire smart attorneys and accountants, and persuade politicians to change laws or create legal loopholes. They use their resources to effect change. ... The poor and middle class don’t have the same resources. They sit there and let the government’s needles enter their arm and allow the blood donation to begin.
- Rich dad constantly reminded Mike and me that the biggest bully was not the boss or the supervisor, but the tax man.
- A corporation can do many things that an employee cannot, like pay expenses before paying taxes. ... Employees earn and get taxed, and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left.
- As part of your overall financial strategy, we strongly recommend owning your own corporation wrapped around your assets.
And that... is one of the biggest secrets that puts the rich ahead of the pack.
Coming Next Time… LESSON 5: THE RICH INVENT MONEY and LESSON 6: WORK TO LEARN - DON'T WORK FOR MONEY
Or dive right in yourself:Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
P.S. This book summary has been completely rewritten and published on the Kindle platform. If you’d like to have this summary available at any time on your Kindle app or device, it’s available here.