Lessons I learned from Robert Kiyosaki

Why rich people don't work for money and make their money work for them? Lessons from the book “Rich Dad, Poor Dad.”

Lessons I learned from Robert Kiyosaki
Photo by Mathieu Stern on Unsplash

When I started my PhD full time, my income drastically reduced. The PhD stipend, although sufficient to manage daily life, is significantly smaller than what I used to get at Google. It motivated me to learn about personal finances. I started taking courses and reading books about it. One of the great book is “Rich Dad, Poor Dad” by Robert T. Kiyosaki. It was first published in 1997 and is still a popular book for financial education. The book talks about some fundamentals related to how we should manage money. Here are the lessons I learned with some quotes from the book.

Rich people don’t work for money, their money works for them.

The key concept Robert uses to explain the finances is that the rich people generate money from the money they already have. This differentiates them from the average people who have to work for the money. It might sound a bit weird, but we have already heard so many times that money makes more money. We just don’t know how. At the same time, we need to cover our expenses. The only way to do that is to work to generate money. There is nothing wrong in taking up a job to get money to cover up expenses. But the end goal should be to save some money over time and make that money make more money. This would give us an option to quit working (or switch to a job that is so good that we would do it even if it didn’t offer any money).

Assets and Liabilities

“An asset puts money in my pocket. A liability takes money out of my pocket.”

The next question is how do rich people generate more money from their existing wealth. Robert says that the concepts are simple. One only needs to understand four terms: Assets, Liabilities, Income, and Expenses. We all know what income and expenses are. Assets increase our income. For example, stocks, real estate, etc. Liabilities take money out of our pockets and increase our expenses. For example, a loan, credit card debt, etc.

Most people think that they know what assets and liabilities are, but they are often wrong at classifying items as assets or liabilities. For example, many people believe that a car is an asset. It is indeed a liability. Once we purchase a car, it adds to our expenses in many ways (parking, maintenance, insurance, etc.). Robert also uses a house as an example of liability. This has been quite controversial. According to him, a house can increase expenses through mortgage, property tax, maintenance, etc. Although, he doesn’t recommend not buying a house. He says that we should buy it when we have enough assets that can cover up for the house. A house that we buy to generate money by renting it is an entirely different thing. It is indeed an asset because it is directly adding money to our pocket.

That’s the key distinction that separates rich from the rest. Rich people are good at identifying what is an asset and what is a liability. They then have to focus on buying more and more assets and having lesser liabilities.

Rich vs. wealthy

“Many people think that being rich and being wealthy are the same thing,” said rich dad. “But there is a difference between the two: The rich have lots of money, but the wealthy don’t worry about money.”

Richness is a measure of how much money we own. This is not the same as wealthiness. Wealthiness is a different measure. One way to measure it is by finding for how long a person can survive if he/she stops working today. A person who owns enough assets that add sufficient cashflow (for example, stock dividends or rent from an apartment) to cover all their expenses can survive without a job. Such a person is considered as wealthy. The best way to reach there is by accumulating assets regularly and lowering our expenses by lowering our liabilities. Once we have enough assets to cover our expenses, we are free to do whatever we want to do. Robert calls it exiting the rat-race.


Robert has some fascinating thoughts about taxes. According to him, taxes hurt middle class and poor more than the rich. We often see that rich people pay very little taxes. Why is that? It is because the rich people educate themselves about laws and find loopholes. One such example is corporates. Rich people create a corporate, which is nothing but a bunch of papers (not very hard to create). They earn money through these corporates. The corporates cover their expenses. This seems quite similar to how a middle-class person who is earning through a job covers his/her expenses. But, the key difference is tax. Normally, we earn money, pay taxes then cover the expenses from the post tax money. The laws are different for the corporates. They earn money, cover their expenses, and then pay the tax on whatever is left. So rich people often exploit this loophole. They cover their major expenses through corporates (business expenses) and pay very little tax.

Learning to create money

“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.”

Some basic knowledge about investing and compound interest already makes a big difference. Most people can’t even do that, and hence forever stay poor. The opportunities to create money keeps hitting us. We fail to identify them because we are not financially educated enough. Robert has a lot of interest in real estate investment. He started learning at a very young age and eventually, it paid off. He could identify good opportunities instantly and make significant money in just a few transactions. The point is that we should actively try to expand our financial knowledge. The financial IQ is made up of knowledge from four key areas: Accounting, Investment, Understanding markets, and Law. That seems like a good starting point to learn how money works.

Work to learn

“Don’t be addicted to money. Work to learn, don’t work for money. Work for knowledge.”

While there is nothing wrong with working for an employer, Robert suggests that we should take up jobs to expand our skills while earning. The focus is not on earning money, but on skills. Acquiring interdisciplinary skills help us identify how the global system works. That knowledge allows us to find more opportunities.

Get the Rich Dad Poor Dad book: US, Canada, UK, India.
You might also like reading The Millionaire Fastlane: US, Canada, UK, India.

My favorites:

Video: Balloons with a memory  (action lab)

Quote: “Learn to use your emotions to think, not think with your emotions.” ― Robert T. Kiyosaki, Rich Dad, Poor Dad