Rich Dad vs. Broke Dad

Rich Dad vs. Broke Dad

The terms “rich” and “broke” imply more than just one’s financial situation. They represent opposing mindsets, behaviors, and money and wealth-building philosophies. Examining the core principles of the so-called “rich dad” versus “broke dad” offers insights into shifting towards the abundant, financially free mentality versus remaining trapped in a cycle of financial struggle.

You learn from the rich dad philosophy by focusing on acquiring assets, building multiple passive income streams, leveraging debt strategically, delaying gratification, and saving aggressively. This leads to exponentially growing wealth and financial freedom. The broke dad mentality of liabilities over assets, reliance on a single income source, debt avoidance, and instant gratification of wants hampers your ability to break free of the rat race.

While situational luck and privilege play a role, adhering to rich dad principles gives you the highest odds of building lasting wealth. In this article, we will compare the behaviors, mindsets, and financial approaches of the rich dad versus the broke dad. Examining these opposing mental models provides a blueprint for building financial independence. Here are the principles your rich dad would have taught you if you had one.

The most common Rich Dad versus Broke Dad principles:

  1. Rich dad focuses on acquiring assets and building passive income streams, broke dad focuses on liabilities and active income.
  2. Rich dad invests in income-generating assets like real estate and businesses, while broke dad spends on depreciating liabilities like new cars and consumer goods.
  3. Rich dad delays gratification, lives below his means, and reinvests savings. Broke dad seeks instant gratification, lives beyond his means, and spends all his income.
  4. Rich dad takes calculated risks, broke dad avoids risks.
  5. Rich dad educates himself and leverages debt and OPM (other people’s money), while broke dad plays it safe relying solely on active earned income.
  6. Rich dad has an abundance mindset, broke dad has a scarcity mindset.
  7. Rich dad sees opportunities, broke dad sees obstacles.
  8. Rich dad has long-term vision and a delayed gratification mentality. Broke dad has short-term thinking and seeks entertainment and leisure.
  9. Rich dad has multiple income streams from assets like real estate, stocks, and businesses. Broke dad relies on one active income source like a job.
  10. Rich dad uses debt strategically for appreciating assets and leverage. Broke dad avoids debt entirely or uses it for depreciating liabilities.

Keep reading for a deeper dive to see what people may have learned from their broke dad but should have learned from a rich dad.

Acquiring Assets and Building Passive Income Streams

A rich dads focus on acquiring income-generating assets that provide passive income streams. This includes investments like real estate, businesses, royalties, and stocks that make money with little active involvement. Building multiple passive income streams allows for financial independence and flexibility.

A broke dad, in contrast, relies solely on active income from a job or gig. This limits income potential and requires constant work to maintain. A broke dad needs to leverage assets and to have the stability of passive income.

Liabilities and Active Income

While a rich dad invests in appreciating assets, a broke dad spends on depreciating liabilities that require ongoing payments. A broke dad buys big houses, new cars, boats, big screen TVs, and status symbols on credit cards. This consumes income rather than freeing up cash flow for saving and investing.

A rich dad avoids buying liabilities and consumer debt. Their income is invested or used to purchase cash-flowing assets. Broke dads have monthly car, credit card, and mortgage payments that limit flexibility.

Income-generating assets vs Depreciating Liabilities

A key distinction is a rich dad buys income-generating assets while a broke dad buys depreciating liabilities. Real estate, businesses, and stocks pay dividends and appreciate over time. Vehicles, electronics, and luxury goods lose value and require maintenance and debt payments.

The rich dad mentality is to make your money work for you. The broke dad mentality is working for money while buying liabilities that require additional work.

Delaying Gratification vs Seeking Instant Gratification

A rich dad operates with long-term thinking and can delay gratification for more significant rewards later. They live below their means and avoid impulse purchases. The focus is growing income streams.

A broke dad seeks instant gratification by living above their means and spending on short-term wants. They need to focus more on savings because income is spent as quickly as it’s earned. Broke dads struggle to delay gratification.

Taking Calculated Risks vs Avoiding Risks

Calculated risks are necessary for significant growth. Rich dads educate themselves and takes smart risks when the odds are in their favor. This could mean starting a business, acquiring rentals, or investing in stocks.

A broke dad plays it safe to avoid risk. They rely solely on active income from a job and have limited investment knowledge or access to capital. Avoiding risks limits the broke dad’s income potential.

Leverage and OPM vs. Relying on Active Income

A rich dad uses leverage like debt, equity partners, and other people’s money to increase returns. Power allows for control of expensive assets with little upfront capital. Rich dads also delegate work by hiring capable teams.

A broke dad relies solely on active income from their time and effort. They avoid business debt and partnerships. This self-reliance mentality limits growth potential. The broke dad has little time and freedom.

Abundance Mindset vs Scarcity Mindset

The wealthy dad’s abundance mindset sees opportunities everywhere and believes in unlimited potential. The broke dad scarcity mindset views obstacles, risks, and limitations in every situation.

This flows into all aspects of life. The rich dad enjoys giving, learning, and growing. The broke dad money as fast as they earn it, resists change, and focuses on fear.

Seeing Opportunities vs. Seeing Obstacles

With an abundance mindset, a rich dad sees opportunities. A broke dad sees obstacles. A rich dad sees fixer-uppers as opportunities in real estate, while a broke dad sees only risk and costs.

A rich dad sees untapped markets in business, while a broke dad sees saturated competition. This mental framing shapes choices and outcomes.

Long-term Vision vs Short-term Thinking

A rich dad thinks in terms of decades with a vision for building lasting wealth. Their choices align with long-term goals. A broke dad makes decisions aimed at instant gratification without considering long-term effects.

Delayed gratification and compounding gains require long-term, consistent actions. Broke dads need more vision and consistency in decision-making.

Assets, Passive Income, Leverage

The rich dad philosophy includes assets, passive income, and leverage. Assets like real estate and royalties generate ongoing passive income. Debt and OPM provide the power to acquire and grow assets.

The broke dad relies on active income, avoids leverage, and spends on liabilities. The rich dad system leads to exponentially growing passive income and asset bases.

Liabilities, Active Income, Self-Reliance

The broke dad philosophy centers around liabilities, active income, and self-reliance. Broke dads buy depreciating cars, clothes, and toys. Their only income source is their job. They rely on their own effort and risk avoidance.

This system makes it difficult to achieve financial independence or wealth. The broke dad remains trapped in the cycle of working for money while assets and passive income don’t accumulate.

Multiple Income Streams vs Relying on One

The rich dad’s ultimate goal is to build multiple passive income streams. These include business profits, stock dividends, rental income, royalties, capital gains, etc.

The broke dad relies on a single active income source in their job. This caps earning ability and provides little flexibility. Building multiple passive income streams is vital for the rich dad’s financial freedom.

Using Debt Strategically vs Avoiding Debt

A rich dad uses debt strategically to acquire assets and increase leverage. They focus on rising value investments and generate income to cover debt payments.

The broke dad avoids all debt out of fear. While avoiding consumer debt is wise, the strategic use of debt can dramatically increase net worth quickly for a rich dad. A broke dad needs to access this vital tool.

High Savings vs Living Paycheck to Paycheck

A rich dad lives below their means and invests the difference into income streams. Their savings rate can even grow to 50% or higher. This capital is used to buy assets.

A broke dad lives paycheck to paycheck with little savings. They need more money to invest and build wealth. High savings are required to fund investments that generate passive income streams.

Key Takeaways

  • Focus on acquiring assets that generate ongoing income, not depreciating consumer goods requiring ongoing payments.
  • Make money work for you through intelligent investments rather than just working for money while buying stuff.
  • Delay short-term gratification by living below your means and investing the difference.
  • Take calculated risks that are asymmetric in your favor to accelerate wealth building.
  • Use leverage wisely, like debt and partnerships, to acquire income-producing assets.
  • Adopt an abundance mentality that spots opportunities and possibilities.
  • Cultivate long-term thinking and persistently work towards your goals.
  • Diversify income streams for stability and flexibility. Don’t rely on one source.
  • Strategically utilize debt to acquire appreciating assets, not simply consume more.
  • Make saving a high priority and invest savings into income streams.


The rich dad philosophy centers on accumulating assets that passively grow your money 24/7 in the background. Wise leverage and an abundance mentality act as accelerants. Delaying gratification and avoidance of liability accumulation are key. Building multiple income streams through varied assets provides ultimate financial freedom and stability. This long-term approach leads to exponentially growing net worth. The broken mindset of consumption and instant gratification hampers wealth building. While luck plays a role, adopting rich dad principles offers the highest probability of achieving financial independence.

The rich dad and broke mentality offers opposing philosophies for building wealth. While circumstantial luck plays a role, adopting the rich dad’s financial principles provides the best odds for achieving financial independence through assets and multiple passive income streams.