Rich Dad Poor Dad by Robert Kiyosaki
Rich Dad Poor Dad by Robert Kiyosaki is a book that has polarized opinion. Many swear by its teachings and many spend their time slating the book and trying to prove that the whole premise is flawed. There are very few people – apart from me – perching on the fence!
One of the underlying concepts discussed in “Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and the Middle Class Do Not!
This book certainly uncovers a few myths about money that you might be fairly shocked by. For example, when you buy a house, is it an asset or a liability? What? “Asset,” you say? Well, it depends. If you won the lottery, had a windfall of some kind or otherwise had a huge stash of lazy cash sitting around, you might have bought yourself a house outright. Well done, you have acquired an asset (sort of). If you are paying a mortgage, then sorry folks, but you are chained to a liability.
Kiyosaki defines, quite simplistically, that if you have an acquisition (doesn’t only apply to property), and it makes money for you, it is an asset. If you have to constantly pay out money because of it, then it’s a liability. Mortgage interest, in general, turns property into a liability, despite what we are all brainwashed to think about property being an evergreen investment. The real investments became mainstream as the recent debt-fuelled bubble expanded to ridiculous proportions, these investments being “buy-to-let” mortgages. In this model, you buy a house to rent out to tenants. The mortgage is paid in rent; the mortgage interest is paid in rent; and if you had a greedy streak, you added a little bit more on to make some income! This is an asset as it makes you money – not to mention getting a free house out of it.
So for me, this is one of the main lessons in Rich Dad Poor Dad. Its detractors say that the book is a pack of lies, is all made up, a fairytale about the author in his childhood growing up with a working class father. And whose best friend’s father was an entrepreneur, a businessman. Kiyosaki claims that it was lessons in wealth taught to him over the years by his friend’s father – his Rich Dad – which he explores in the book. Many claim that the facts, especially about the author’s background are made up; that rather than becoming wealthy, then writing a book about it, he actually wrote a book about general finance, packaged in a nice story, and became wealthy on the book sales. A case of effect and cause, rather than cause and effect!
Personally I don’t care. Are the arguments presented valid? Yeah, I think so. I also think Rich Dad Poor Dad is a useful book to read to get to grips with assets and liabilities, so you don’t end up kidding yourself that you are working hard, saving hard, and moving towards financial independence. Sadly for most of us, we’re not. We are living (in the West) in a fairly unusual time. British Prime Minister Gordon Brown said on many occasions over the last decade that there would be, “no return to…boom and bust“. Most people laugh at this now, thinking only about economic recession. I think Mr Brown was entirely correct, and that we have had no significant or even measurable boom in the last ten years! When people bought stuff, owned stuff, “invested” in property and “released equity” to buy a third car or a cruise, we all kidded ourselves that we were in a period of economic growth – a boom. But it wasn’t a boom, since all that perceived growth was based on a foundation of borrowing and debt. On the whole, the “investments” bought during this time were actually depreciating liabilities, with compound debt interest eating into any perceived value add.
Perhaps we all need to get a copy of Rich Dad Poor Dad into every classroom without delay, as the lessons within may have averted the crazy backward thinking that turned into one of the worst recessions in living memory.
Rich Dad Poor Dad by Robert Kiyosaki (LifeSiren score: 7/10).
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