Rich Dad, Poor Dad: Chapter One

What the Rich Teach Their Kids About Money--
That the Poor and Middle Class Do Not!

Chapter One

Rich Dad, Poor Dad
As narrated by Robert Kiyosaki

I had two fathers, a rich one and a poor one. One was highly educated and
intelligent; he had a Ph.D. and completed four years of undergraduate work in
less than two years. He then went on to Stanford University, the University of
Chicago, and Northwestern University to do his advanced studies, all on full
financial scholarships. The other father never finished the eighth grade.

Both men were successful in their careers, working hard all their lives. Both
earned substantial incomes. Yet one struggled financially all his life. The
other would become one of the richest men in Hawaii. One died leaving tens of
millions of dollars to his family, charities and his church. The other left
bills to be paid.

Both men were strong, charismatic and influential. Both men offered me advice,
but they did not advise the same things. Both men believed strongly in
education but did not recommend the same course of study.

If I had had only one dad, I would have had to accept or reject his advice.
Having two dads advising me offered me the choice of contrasting points of
view; one of a rich man and one of a poor man.

Instead of simply accepting or rejecting one or the other, I found myself
thinking more, comparing and then choosing for myself.

The problem was, the rich man was not rich yet and the poor man not yet poor.
Both were just starting out on their careers, and both were struggling with
money and families. But they had very different points of view about the
subject of money.

For example, one dad would say, “The love of money is the root of all evil.�
The other, “The lack of money is the root of all evil.�

As a young boy, having two strong fathers influencing me was difficult. I
wanted to be a good son and listen, but the two fathers did not say the same
things. The contrast in their points of view, particularly where money was
concerned, was so extreme that I grew curious and intrigued. I began to start
thinking for long periods of time about what each was saying.

Much of my private time was spent reflecting, asking myself questions such as,
“Why does he say that?� and then asking the same question of the other dad’s
statement. It would have been much easier to simply say, “Yeah, he’s right. I
agree with that.� Or to simply reject the point of view by saying, “The old man
doesn’t know what he’s talking about.� Instead, having two dads whom I loved
forced me to think and ultimately choose a way of thinking for myself. As a
process, choosing for myself turned out to be much more valuable in the long
run, rather than simply accepting or rejecting a single point of view.

One of the reasons the rich get richer, the poor get poorer, and the middle
class struggles in debt is because the subject of money is taught at home, not
in school. Most of us learn about money from our parents. So what can a poor
parent tell their child about money? They simply say “Stay in school and study
hard.� The child may graduate with excellent grades but with a poor person’s
financial programming and mind-set. It was learned while the child was young.

Money is not taught in schools. Schools focus on scholastic and professional
skills, but not on financial skills. This explains how smart bankers, doctors
and accountants who earned excellent grades in school may still struggle
financially all of their lives. Our staggering national debt is due in large
part to highly educated politicians and government officials making financial
decisions with little or no training on the subject of money.

I often look ahead to the new millennium and wonder what will happen when we
have millions of people who will need financial and medical assistance. They
will be dependent on their families or the government for financial support.
What will happen when Medicare and Social Security run out of money? How will a
nation survive if teaching children about money continues to left to parents –
most of whom will be, or already are, poor?

Because I had two influential fathers, I learned from both of them. I had to
think about each dad’s advice, and in doing so, I gained valuable insight into
the power and effect of one’s thoughts on one’s life. For example, one dad had
a habit of saying, “I can’t afford it.� The other dad forbade those words to be
used. He insisted I say, “How can I afford it?� Once is a statement, and the
other is a question. One lets you off the hook, and the other forces you to
think. My soon-to-be-rich dad would explain that by automatically saying the
words “I can’t afford it,� your brain stops working. By asking the question
“How can I afford it?� your brain is put to work. He did not mean buy
everything you wanted. He was fanatical about exercising your mind, the most
powerful computer in the world. “My brain gets stronger every day because I
exercise it. The stronger it gets, the more money I can make.� He believed that
automatically saying “I can’t afford it� was a sign of mental laziness.

Although both dads worked hard, I noticed that one dad had a habit of putting
his brain to sleep when it came to money matters, and the other had a habit of
exercising his brain. The long-term result was that one dad grew stronger
financially and the other grew weaker. It is not much different from a person
who goes to the gym to exercise on a regular basis versus someone who sits on
the couch watching television. Proper physical exercise increases your chances
for health, and proper mental exercise increases your chances for wealth.

My two dads had opposing attitudes in though. One dad thought that the rich
should pay more in taxes to take care of those less fortunate. The other said,
“Taxes punish those who produce and reward those who don’t produce.�

One dad recommended, “Study hard so you can find a good company to work for.�
The other recommended, “Study hard so you can find a good company to buy.�

One dad said, “The reason I’m not rich is because I have you kids.� The other
said, “The reason I must be rich is because I have you kids.�

One encouraged talking about money and business at the dinner table. The other
forbade the subject of money to be discussed over a meal.

One said, “When it comes to money, play it safe, don’t take risks.� The other
said, “Learn to manage risk.�

One believed, “Our home is our largest investment and our greatest asset.� The
other believed, “My house is a liability, and if your house is your largest
investment, you’re in trouble.�

Both dads paid their bills on time, yet one paid his bills first while the
other paid his bills last.

One dad believed in a company or the government taking care of you and your
needs. He was always concerned about pay raises, retirement plans, medical
benefits, sick leave, vacation days and other perks. He was impressed with two
of his uncles who joined the military are earned a retirement and entitlement
package for life after twenty years of service. He loved the idea of medical
benefits and PX privileges the military provided its retirees. He also loved
the tenure life and job benefits seemed more important, at times, than the job.
He would often say, “I’ve worked hard for the government, and I’m entitled to
these benefits.�

The other believed in total financial self-reliance. He spoke out against the
“entitlement� mentality and how it was creating weak and financially needy
people. He was emphatic about being financially competent.

One dad struggled to save a few dollars. The other simply created investments.

One dad taught me how to write an impressive resume so I could find a good job.
The other taught me how to write strong business and financial plans so I could
create jobs.

Being a product of two strong dads allowed me the luxury of observing the
effects different thoughts have on one’s life. I noticed that people really do
shape their life through their thoughts.

For example, my poor dad always said, “I’ll never be rich.� And that prophesy
became reality. My rich dad, on the other hand, always referred to himself as
rich. He would say things like, “I’m a rich man, and rich people don’t do
this.� Even when he was flat broke after a major financial setback, he
continued to refer to himself as a rich man. He would cover himself by saying,
“There is a difference between being poor and being broke. Broke is temporary,
and poor is eternal.�

My poor dad would also say, “I’m not interest in money,� or Money doesn’t
matter.� My rich dad always said, “Money is power.�

The power of our thoughts may never be measured or appreciated, but it became
obvious to me as a young boy to be aware of my thoughts and how I expressed
myself. I noticed that my poor dad was poor not because of the amount of money
he earned, which was significant, but because of his thoughts and actions. As a
young boy, having two fathers, I became acutely aware of being careful which
thoughts I chose to adopt as my own. Whom should I listen to – my rich dad or
my poor dad?

Although both men had tremendous respect for education and learning, they
disagreed in what they thought was important to learn. One wanted me to study
hard, earn a degree and get a good job to work for money. He wanted me to study
to become a profession, an attorney or an accountant or to go to business
school for my MBA. The other encouraged me to study to be rich, to understand
how money works and to learn how to have it work for me. “I don’t work money!�
were words he would repeat over and over, “Money works for me!�

At the age of 9, I decided to listen to and learn from my rich dad about money.
In doing so, I chose not to listen to my poor dad, even though he was the one
with all the college degrees.

A Lesson From Robert Frost

Robert Frost is my favorite poet. Although I love many of his poems, my
favorite is The Road Not Taken. I use its lessons almost daily:

The Road Not Taken

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads onto way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence;
Two roads diverged in a wood, and I –
I took the one less traveled by,
And that has made all the difference.

Robert Frost [1916]

And that made all the difference. Over the years, I have often reflected upon
Robert Frost’s poem. Choosing not to listen to my highly educated dad’s advice
and attitude about money was a painful decision, but it was a decision that
shaped the rest of my life.

Once I made up my mind whom to listen to, my education about money began. My
rich dad taught me over a period of 30 years, until I was age 39. He stopped
once he realized that I knew and fully understood what he had been trying to
drum into my often thick skull.

Money is one form of power. But what is more powerful is financial education.
Money comes and goes, but if you have the education about how money works, you
gain power over it and can begin building wealth. The reason positive thinking
alone does not work is because most people went to school and never learned how
money works, so they spend their lives working for money.

Because I was only 9 years old when I started, the lessons my rich dad taught
me were simple. And when it was all said and done, there were only six main
lessons, repeated over 30 years. This book is about those six lessons, put as
simply as possible as my rich dad put forth those lessons to me. The lessons
are not meant to be answers by guideposts. Guideposts that will assist you and
your children to grow wealthier no matter what happens in a world of increasing
change and uncertainty.

Lesson #1 The Rich Don’t Work for Money

Lesson #2 Why Teach Financial Literacy?

Lesson #3 Mind Your Own Business

Lesson #4 The History of Taxes and the Power of Corporations

Lessons #5 The Rich Invent Money

Lesson #6 Work to Learn – Don’t Work for Money