Key Terms and Definitions in "Rich Dad, Poor Dad" by Robert Kiyosaki

by Noelle Duncan

This chapter is a free excerpt from Quicklet on Rich Dad, Poor Dad.

Asset – As defined by Kiyosaki, an asset is anything that you acquire that puts money into your pocket. Assets are what the rich use to generate wealth over time. They come in many forms, including real estate, businesses that don't require you to work at them, and stocks and bonds.

Liability – Any acquisition which takes money out of your pocket. Rich Dad, Poor Dad examines how many people consider owning a house as an asset, while Kiyosaki views a house as a liability. Home owners don't always take into account the cost of maintenance for the house, the fact that the mortgage may not be paid off by the time they want to move again, and the fact that houses can depreciate in value.

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Asset – As defined by Kiyosaki, an asset is anything that you acquire that puts money into your pocket. Assets are what the rich use to generate wealth over time. They come in many forms, including real estate, businesses that don't require you to work at them, and stocks and bonds.

Liability – Any acquisition which takes money out of your pocket. Rich Dad, Poor Dad examines how many people consider owning a house as an asset, while Kiyosaki views a house as a liability. Home owners don't always take into account the cost of maintenance for the house, the fact that the mortgage may not be paid off by the time they want to move again, and the fact that houses can depreciate in value.

Financial literacy – Understanding basic financial concepts like accounting, how to invest, how markets work, and the law surrounding taxes, corporations, and money in general. Much of the book is devoted to stressing the importance of financial literacy in order to achieve success and lamenting the lack of financial education in the school system.

Financial IQ – A measure of financial intelligence in an individual. The ability to see opportunities even in a bad situation, such as a recession or plummeting housing market.

Rat Race – The term for the financial situation of the masses. It describes a cycle in which a child excels in school, gets into a "good" college and earns a degree. As an adult, they find a secure, well-paying job with benefits and begin to save money. They get married, buy a house, have children, acquire debt and have increased expenses. They work hard for promotions and save for retirement, but as their income increases, their debts and expenses increase as well.

Corporation – A legal entity that has special privileges and liabilities. Kiyosaki shows that many rich people use corporations to hold their wealth, as corporations can spend money pre-tax.

Cash flow – The movement of money from a business, asset, or financial endeavor. Cash flow can refer to money coming into or out of a business.

Robin Hood ideal – The belief that taxes take from the rich and redistribute wealth to the poor. Rich Dad, Poor Dad challenges this theory and purports that taxes hurt the poor and middle class much more than the rich.

Market – A system or institution in which parties can exchange goods or money. Rich Dad, Poor Dad claims that knowledge of markets and how they function is crucial to financial success.

Supply and demand – The method by which prices are determined in a given market. The relationship of desire for a given product to its availability factors into the worth of the product in question.
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