Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
That might be the longest title in the world for a book but don’t let the title fool you. I thought this book was truly an inspiring and fascinating read. I’ve always had an entrepreneurial spirit and the principles laid forth in this book echoed a lot of what I’ve done and am doing with my own life. The book has received mixed reviews but in general I think the good outweighs the bad.
It took me a few pages (ok maybe more than a few) to figure it out but the book’s main character Robert Kiyasaki doesn’t really have two dads. He grew up under the influence of his real dad (the poor one) and worked for his friend’s dad (the rich one) all throughout his childhood and into early adult life. Robert’s poor dad was highly educated, believed in working hard, not spending beyond his means, but he never quite made it. On the other hand, Robert’s rich dad taught him that the poor and the middle class work for money while the rich have money work for them.
Learning From the Rich
The one thing that you can’t take away from this guy is that he has achieved what he set out to do big time. Over the years, he has made a lot of money and while I don’t agree with everything he does there is still a lot that can be learned. You need a little bit of luck to go from nothing to a millionaire in 47 years but you also need a lot of skill. I think for me the biggest take away from the book is that most ultra-successful people don’t get to the top working for somebody else.
Any time you are working under someone, there’s always going to be a limit on the amount of money you can make, the responsibility you’re given and the power you have. Someone will always be above you with the final say but that’s not the case when you work for yourself. Robert learned at a young age that his rich dad worked very hard but he was always the one in charge. He was the boss and he was the one who made the rules.
Being an entrepreneur is way harder than working a day job but that’s also why the rewards are so much greater. The author tends to glorify working for yourself and I think he makes it sound a lot easier than it is. Trust me, most people aren’t cut out to work for themselves but there’s nothing stopping you from trying.
Assets vs Liabilities
I think some of his best guidance comes when he talks about the difference between an asset and a liability. Most people tend to think their home is an asset yet they don’t treat it like an investment at all. Especially here in California, where rent vs buy multipliers are not even close to reasonable investment levels (it’s way more expensive to buy a house than rent a comparable one).
“Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets”
I love that quote. How many people actually believe that a diamond ring is a good investment? I would NEVER go into debt to pay for a liability (think cars, vacations, jewelry, etc) yet most people do it all the time. And that’s why most people complain about not having enough money and wanting to be rich but will never get there.
And Now the Bad
It seems like people either love or hate this book but I’m somewhat ambivalent. I think way too many people go through life complaining about their job or their situation yet refuse to do anything about it. Robert was not one of those people and I have a feeling a lot of the naysayers are the ones who went to college, got a decent job, yet find themselves living paycheck to paycheck without even knowing it or working until they’re 65 to pay off all the crap they bought.
Related Review: The Boglehead’s Guide to Investing
I like the real estate examples the book uses but Robert definitely downplays the risk at times. He makes it seem like it’s a cinch to go out and find a cash flowing property in any city in America. One thing that might make you a little weary is all of the bragging he does about how much money he made doing this, the Porsche he bought for his wife, etc.
A little bit of bragging is good for inspiration but by the end of the book I found myself saying, “Dude, we get it. You’re rich.” I think he tends to downplay the risk in a lot of his investments and although he may have had a lot of success picking stocks in the 90’s the facts and evidence show that this is not a viable strategy for an overwhelming majority of people. I highly disagree with this strategy of his, stock picking should be limited to 5-10% of your portfolio. All of the evidence and facts support this.
My Take on The Book
Overall, I would recommend this book but with the caveat that it is read as just one part of your financial training. A basic investing book like the Boglehead’s Guide to Investing will quickly stop your head from spinning and bring you back down to reality after he gets done talking about all the great IPO’s and stocks he was a part of in the 90’s. Risk and reward are always related and although Kiyosaki claims to have made a ton of money off small caps during his career, you can bet that he took on an equal amount of risk and/or lost plenty of money on these bets too.
I do think that his advice on investing in rental properties (and not your primary residence) and running your own business is pretty invaluable though since most people don’t do this. This book shouldn’t be treated as a get rich quick manual. Instead, consider it one man’s story about how he became wealthy. There is good and bad advice abound in the book and it’s up to the reader to determine which course of action to take.
Don’t kid yourself though, being an entrepreneur is a lot of work. But who says you have to do it all at once? I know that in my personal life I have done a little bit of both and have been very successful. Even at the age of 27, I don’t depend on my day job like so many others do because I have secondary sources of income: rental, online, investments, etc. Sure I’ve had to make some sacrifices here and there but for me it’s all about finding balance and sacrificing a little bit now so that I can have WAY more later.
Readers, have you read Rich Dad Poor Dad? What do you think about Robert Kiyasaki’s take on making money and getting rich? Is it still doable?
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-Harry @ PF Pro