By Dr. James M. Dahle, WCI FounderThe on-line personal finance community can be reasonably critical of Robert Kiyosaki the author of the Rich Dad, Poor Dad book series. I ‘ve been critical myself. Employees who invest chiefly in static asset allocations of low-cost, broadly diversified exponent common funds tend to be particularly critical while entrepreneurs and real estate of the realm investors tend to be less critical .
Robert Kiyosaki’s Rich Dad, Poor Dad Criticism
The main criticisms of Rich Dad, Poor Dad that I hear are :
- Kiyosaki is probably a liar (there likely never was a rich dad)
- Rich Dad, Poor Dad gives no concrete advice, just a collection of cliches about money
- Kiyosaki is just running a cult of personality
It ‘s truly not all that different from early well-known fiscal personalities like Suze Orman or Dave Ramsey, although I do n’t recall anyone ever calling either of them liars. But here ‘s the way I look at all of them vitamin a well as every koran, web log post, or podcast I ever encounter :
Take what you find utilitarian and leave the remainder .
seriously. If you ‘re looking for some guru who constantly gets everything correctly and with whom you will agree 100 % on every controversial exit in the fiscal worldly concern, you are bound to be disappointed. Just take what you find useful from every source ( including this one ) and incorporate it into your own personal fiscal doctrine .
In this post, I ‘ll discuss what I find utilitarian in Rich Dad, Poor Dad. I bet some of my younger readers have not even hear of this book beginning published in the early 1990s .
The Book Rich Dad, Poor Dad Increases Interest in Finances
My ma read Rich Dad, Poor Dad. My ma. I think I might have gotten her to read The CoffeeHouse Investor once. But that ‘s it for fiscal books. She actually picked this one up on her own, read it, and sent a summary out to her kids. There might be lots of bad ideas in the book ( do n’t bother going to college for case. ) The bible might be in truth short-change on specifics. But I truly believe that it frequently leads people to read early, more specific/accurate books. In that sense, it ‘s a win .
Robert Kiyosaki Is a Marketing Genius
Kiyosaki has sold a distribute of books and other gorge. so even if you are n’t learning a thing from what he is selling, there is a lot to learn from how he is selling it. Dave Ramsey is exchangeable. That fellow can sell. He ‘s got people volunteering to sell his thrust for him. He has people lining up to pay to come listen to him sell stuff to them .
It ‘s brilliant. Kind of like the annual gravy boat show. People buy a tag to come do what they can do in the gravy boat dealerships for free. That takes good market skill. We all have something to sell and we can better learn how to do that by observing Kiyosaki. I mean, just expect at the reserve ‘s subtitle :
What the ample teach their kids about money– that the hapless and center class do not .
That is clickbait if I ever have always seen it. That was clickbait before there was clickbait. A very impressive turn of phrase. Some people with market degrees never come up with a line that good .
Assets Make Money
possibly the most crucial concept in Rich Dad, Poor Dad is that assets make money and liabilities cost money. It ‘s not a perfect, absolute affirmation. But it ‘s broadly true. A car is generally not an asset, unless you ‘re an Uber driver. I mean, it decreases in measure, you have to pay to insure it, gas it, maintain it, and rectify it .
I ‘ve been telling graduating aesculapian students this for a decade–a family is not an amazing investment. It precisely is n’t. Is it an investment ? Sure. It may appreciate and it pays “ dividends ” of save rent. But it ‘s often not an amazing investment, specially when you do n’t hold on to it long adequate for appreciation to make up for the big transaction costs .
On the other pass, stocks, bonds, reciprocal funds, investment properties, and other small businesses are assets. They have a positive expected return. They normally have positive cash menstruate. I love Kiyosaki ‘s recommendation to FIRST buy the assets and then buy the liabilities. now I ‘m not quite as big of a winnow of leveraging up my life as he is — he suggests leveraging up the asset ( investment property ) and then using the cash stream to buy the liability ( car ) on credit, but I do like the theme of getting deep beginning before buying the outbound signs of being full-bodied .
The Cash Flow Quadrant
This was a concept that proved then democratic Kiyosaki wrote an integral book just on this. The mind was that income comes from four unlike places, or quadrants :
- E – Employee – You have a job
- S – Self-employed – You own a job
- C – Corporation – You own a business and others work for you
- I – Investor – Money works for you
basically, each quadrant is better than the last because you pay less in taxes and earn more relative to the sum of sour you put in. He goes all kinds of places with this quadrant in the follow-up book that does n’t necessarily make a batch of feel, but there is a carnival measure of truth in the basic concepts .
It IS a distribute easier to take deductions when you are freelance than when you are an employee. The best tax deductions are business deductions. They ‘re better than itemize deductions because you can take them all and hush take the standardize deduction. They ‘re better than above-the-line deductions because you do n’t have to pay payroll taxes on them. They ‘re even better than the illusion QBI Deduction, which has all kinds of limitations and even then is only 20 % of QBI. Business expenses fair reduce your business income dollar for dollar.
investment income IS taxed at a preferable rate. You are far better off tax-wise getting all of your populate income from dependent dividends, long-run capital gains, and rend sheltered by disparagement than you are working for it. not only do you enjoy the lower tax brackets ( 0 % for some ) but you besides do n’t have to pay any payroll taxes on that money .
It IS a batch better to have others and your money working for you. When you hire an employee ( or contractile organ ), you ( hopefully ) never pay them precisely what they are very bringing in for you. You ca n’t do that and have a profitable clientele. Some parcel of their feat and ferment flows to you as profit .
It is the lapp when you own a real number estate of the realm property. If all of the lease, admiration, and tax breaks were paid out in expenses, there would be no function to owning the matter, at least in the long run .
When you own a sum stock market exponent fund, there are literally millions of Americans who wake up each day and go to work FOR YOU. Some bantam share of their labor movement flows into your pocket because you own the business they are working for. Get adequate of those bantam short employees and you never have to work a day in your animation. That ‘s capitalism .
Be an Entrepreneur
A lesson that most folks take away from the script is that being an entrepreneur is by and large a good thing. I think that ‘s a fantastic example. now, if you take it to an extreme ( as Kiyosaki at times advocates ) that will get you into trouble. But entrepreneurship done well has made a batch of people a set of money, reduced a bunch of burnout, and provided fiscal freedom to many .
That does n’t mean everyone has what it takes to be an entrepreneur. That does n’t mean everyone can become more affluent as an entrepreneur than plainly working hard in their choose profession/job, carving out a boastfully chunk of their earnings, and investing it wisely. But it is very much a feasible path to a fulfilled, affluent life .
One of the biggest criticism of the ledger is that there are no specifics. Well, that ‘s kind of how entrepreneurship is. You ca n’t do it precisely as the end person did. It wo n’t work again. You have to chart your own path. It is n’t like the checkup grapevine where you study organic chemistry, become the president of the united states of the pre-med club, study for 3 weeks for Step 1, do your medicate clerkship before your pediatrics clerkship, finish residency, pursue a family, become a clinical teacher, then an assistant professor, then an associate professor, and then a full tenure professor. You can go from organic chemistry to CEO in 3 months. Or you can muddle around in a “ medicine clerkship ” for years before breaking out .
= ” 2″ link= ” t9IV6″ via= ” yes ” ] That ‘s kind of how entrepreneurship is. You ca n’t do it precisely as the concluding person did. It wo n’t work again. You have to chart your own path .
I am far less critical of this non-specific “ be an entrepreneur ” kind of advice in the record now that I am a successful entrepreneur. I ‘m actually amazed there are entrepreneur classes in business school. I just do n’t think most of what makes a good entrepreneur can be taught. I think the most successful ones pursued an idea/problem/solution and then learned the business skills required to carry it out quite than learned the business skills and then went looking for the great estimate .
Abundance and Scarcity Mindsets
Another concept in Kiyosaki ‘s writings is the mind of avoiding the “ Scarcity Mindset. ” The Scarcity Mindset is the idea that the proto-indo european is of a limited size. It can not be grown. All that can happen is that you can get a bigger lump of it. however, to do so, you must take it from person else. So you end up being fishy of others, focusing besides much on your expenses alternatively of your income, and in the end, become mean and poor .
The opposite is the Abundance Mindset, where you realize the proto-indo european can grow. Everyone can become more affluent and there are no limits on your income. separate of this is good being affirmative, but I ‘ve run into enough people with a Scarcity Mindset that I think warnings about it are appropriate .
Imagine a FIRE blogger saving 90 % of their income for ten-spot years to hit the “ Retire Button ” to then live another 60 years washing Ziploc bags and reusing newspaper towels. At a certain point, it ‘s better to just find pay solve you actually like and work a few more years. As Seth Godin said ,
alternatively of wondering when your future vacation is, possibly you should set up a life you do n’t need to escape from .
Real Estate Is a Good Investment
Another concept most people take from the writings of Kiyosaki is that real estate is a good investment. The index fund crowd poo-poos this idea entirely besides much. I have just met excessively many people who have become financially autonomous investing primarily in direct ( or indirect ) real estate of the realm to deny it is a valid way to invest and become affluent .
That does n’t mean index funds are not effective investments. That does n’t mean that there is not a lot of gamble in very estate induct. It surely does n’t mean there are not aspects of real estate invest that are like having a second caper as a realtor, developer, landlord, handyman etc. That ‘s all dependable. But it is still an asset class desirable of inclusion in a portfolio in some form and in some sum .
Is Rich Dad Poor, Dad a Good Book Worth Reading?
The bed line is that in most fiscal books and blogs there are some pearls of wisdom. Sift through the rubbish, find them, and incorporate them into your life.
Read more: The 10 best Jojo Moyes books, rated by us
What do you think ? Have you read rich Dad, Poor Dad ? What did you think of it ? Comment below !
[ This updated post was originally published in 2019. ]
