My Rich Dad, Poor Dad Review
4 minute read
Rich Dad, Poor Dad by Robert T. Kiyosaki is one the most popular personal finance books of all time. Mr. Kiyosaki discusses his childhood growing up and learning about finances from two different perspectives. One of his real dad who was an educator(Poor Dad) and the other of his friend’s dad who was an entrepreneur/business owner (Rich Dad). By the way, his real dad was not even “Poor” lol but I’m guessing as far as building wealth he thought his real dad had a poor man’s mentality. So for a majority of this book, Robert talks about the lessons he learned from both viewpoints. Mr. Kiyosaki is strong on real estate investing, although he discusses some of his real estate deals he doesn’t dive deep into the backstory behind them. Throughout this post, I will briefly discuss what I thought were the key lessons within this book.
Financial Literacy and Traditional Education System
Financial literacy is probably the most important tool needed when it comes to building wealth. Robert talks about how the American education system doesn’t do a great job of teaching people about money. This book is over 20 years old and this assessment is still 100% accurate today. Cause I damn sure didn’t learn anything about money, taxes, and investing in grade school. Let alone business ownership and building wealth. He discusses how the rich do not work for money. They buy up assets and businesses that pretty much generate money for them. The traditional student is taught to go to school, go to college, then get a good job and work 40+ hours a week until you’re 65. He thinks this formula is a recipe for disaster. He also discourages investing in the stock market long term due to the fear of market crashes. I disagree with this because you can properly invest in the stock market and have a good retirement, depending on your investment strategy and asset allocation. But I totally understand where he’s coming from after witnessing millions of Americans wealth dwindled during these market crashes. Robert also explains how the most educated person (poor dad) does not always translate to being financially literate. A person can be highly educated and professionally successful, but still financially illiterate.
Assets vs Liabilities
According to Mr. Kiyosaki, an asset puts money in your pocket and a liability takes money out of your pocket. Robert explains how rich people take their income and invest it into other assets that produce more income and poor people take their income and buy more liabilities and that depreciate in value. Real estate, stocks, bonds, property are assets because they can put more money in your pocket. Cars, mortgages, student loans and credit card debt are all liabilities since they take money out your pocket each month. It gets controversial when he begins to the explain how your primary residence is a liability and not an investment. I don’t necessarily agree with this because I think your primary residence is much more than a category within a spreadsheet. Your primary home can become a liability when your spending most of your paycheck to maintain it. This means you are house poor and are living beyond your means. In the end, there are more emotions involved when you’re living in a place you call home that is priceless.
Buying Luxuries with Assets
One of my favorite gems I got out of this book was the concept of buying luxuries with your assets. Rich people don’t buy luxuries with their own money. They buy assets that generate the income needed to buy luxuries. For example, if a rich person owned a small 4 unit apartment building with 4 tenants where the rent is $1k each per month, they’re bringing in around $4k per month in rental income. If the mortgage on that property was $2k a month after insurance and property taxes etc.. the profit could be at least $1000 to $1500 a month. The rich person can use that to pay for whatever luxury car they desire. Boy, I wish I knew this before I bought my $30k+ car fresh out of college. My First Car Purchase The average middle-class person takes their hard earned income and finances a car with interests. It never dawned on me that I could figure out how to generate enough income to wear that income can purchase a car for me. Then I can keep my earned money and invest it elsewhere. Also, while earning a profit the tenants are paying down the mortgage on the rental property for you. So you’re gaining equity in the property, the property can also increase over time by itself and on top of that, you’re making a profit after expenses are paid. The rich don’t say “I can’t afford it” they ask themselves, “What can I do to afford this?”. This was an interesting perspective for me.
Overall I think Rich Dad, Poor Dad by Robert T. Kiyosaki was a good read. This book is a solid beginner guide on preparing your mind on how to transition from a regular 9 to 5 job into entrepreneurship and business ownership. Rich Dad, Poor Dad challenges you to think differently from a salary or hourly employee. It gives you an alternative route to building wealth outside of a 401k or IRA plan. Your mindset is so vital during the process of becoming an entrepreneur. Of course, you can read all the books and study all you want, but the best way to learn is through experience and actually trying. You’re not always going to be perfect, but the main goal is to learn from mistakes and improve over the long haul. I’d recommend this book to anybody who wants a different perspective on making an income.