The full title of this great book is "Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money - That The Poor And Middle Class Do Not!" by Robert T. Kiyosaki with Sharon L. Lechter, CPA.
This book is a revelation and many people have raved about it to me but I read the follow-up "Cashflow Quadrant" first.
Like all sequels it reprised the first story but that may be the only thing that denies this book my highest accolade - the full five stars.
As a chartered accountant and a regular investor I thought I was pretty sophisticated when it came to finance. I'm not a multi-millionaire so there is room for improvement but I thought I knew my onions.
But I love the way this book teaches the fundamentals about money in a really compelling way.
I'm amazed that many people find the topic of finance boring. They have no interest in learning how to read a set of accounts and they are often repelled by the financial services industry.
Rich Dad Poor Dad is the book to make people change their minds.
To sit up and think hard about what they are really doing with their money which has such an important effect on their lives.
What They Teach You At School Is Wrong
The first key lesson of Rich Dad Poor Dad is that what they teach you in school is wrong. Working hard and getting a good job is not the route to financial freedom.
In the 21st century world there is little job security and with the changing demographics the state becomes increasingly unable to support people in retirement.
Even worse in the UK, the economy is being divided between those with pension rights from the public purse and those from the private sector.
I just don't know what will happen in twenty years time but it frightens me to think about the number of people who are living on empty hopes.
The simple message is "You are on your own!"
The problem starts early in school.
When you hear statistics of just how many people leave school with inadequate reading and writing skills it's no surprise that people leave school with inadequate financial education but it is a tragedy.
The system teaches people to be good employees. Just as Robert Kiyosaki's Poor (and real) Dad tried to teach Robert.
Go to school, work hard, get good grades in your exams, go to university, get a degree, get a job.
That's what my parents told me.
It was an opportunity denied to both my Mum and Dad (I was the first of my extended family to go to University) and it's become:
- the middle class norm and
- what the working class aspire to for their children.
But Rich Dad Poor Dad makes it clear that good employees are trapped in the rat race.
Perhaps you are already whizzing around, like a hamster in a wheel, working harder and harder to make little progress.
The rat race goes something like this:
- Leave university, get a job.
- Work hard, get promoted, get a pay rise.
- Buy a house. "It's a great investment" people say and just look at how house prices have shot up in the last ten years.
- Struggle to afford to pay for the house, deny yourself those little luxuries that make life a little bit more bearable or go into debt because "life is for living".
- Work harder - you need another salary increase.
- Get promoted and get paid more.
- Buy a bigger house and mortgage yourself up to the hilt. "It's still a great investment..."
- Continue to struggle for spending money and lie awake worrying about how you are going to keep all these wheels spinning as interest rates increase and you worry about whether your job is safe.
Does that sound familiar?
It's the problem that Robert Kiyosaki and Sharon Lechter are writing about in "Rich Dad Poor Dad"
Your Home Is A Liability
No I didn't use the wrong word and nor did Robert Kiyosaki when he wrote it in Rich Dad Poor Dad.
Your home is a liability because all you do is spend, spend, spend!
You spend cash to put down the deposit, to pay the mortgage interest and repayments, you pay the utilities, the property taxes, the repairs and maintenance. It's almost a never-ending list of money going out and how much comes back - nothing. Or at least not until you sell it.
But what happens most of the time when you sell it?
You make a nice profit but none of the cash goes into your bank account and stays there. Instead you reinvest it. You buy a bigger house and borrow even more because you can.
Accountants may disagree but I like Robert Kiyosaki's definition of assets and liabilities because it very clearly links back to cash flow.
An asset generates cash for you on a regular basis.
A liability consumes cash for you on a regular basis.
An investment bond that pays you 8% per year interest is an asset - it is generating cash.
A buy-to-let house where the rents are £1,000 per month and your outgoings are £600 per month is an asset.
A buy-to-let house where the rent is £1,000 but it costs you £1,200 is a liability. Owning that house is costing you cash every single month that you own it. This is the reality that some people in the buy to let boom are now having to face, either because they have been able to find tenants or rents are not keeping up with cost increases.
I know that there may be a big profit at the end when you sell it. I certainly hope so but property prices are falling in the US and the UK.
Certainly in my property owning days I have seen one extended period where house prices tracked sideways and another short time when prices fell although the general trend has been an increase. But I can't see how it can last indefinitely.
Only Two Things In Life Are Certain - Death And Taxes
The Robert Kiyosaki's "Rich Dad Poor Dad" book tears that myth to shreds and I've seen it for myself.
The rich shelter their wealth from taxes, the poor don't earn enough to be too concerned as they get far more back from the state than they give.
It is the successful working people and the middle classes that pay the taxes and carry the burden of state financing stoically.
But that's not because they like paying taxes.
Or feel that it is their moral obligation.
But because they don't know any different. They don't know the tax loop-holes and they can't afford to pay a top-notch accountant or tax lawyer to help.
But there is a simple difference between employees and the rich people with their own businesses which Rich Dad Poor Dad makes clear.
The poor earn their money and their taxes are automatically deducted before they get it.
People with their own businesses earn their money, they get their cash, decide how much they want to spend and then pay taxes.
Develop Your Financial IQ
Financial education should begin in schools but too often it doesn't.
Get yourself a copy of "Rich Dad Poor Dad" and start to really understand finance. The book will challenge many of your ideas.
The Source Of Robert Kiyosaki's Wisdom
His real Dad was the Poor Dad. An employee, with a good job but a hard life.
But his best friend's Dad was different. He was one of the richest men on Hawaii and an entrepreneur and investor. He had a great life and he was the Rich Dad of the story.
Robert saw the difference and had the foresight and awareness to see that it was the system that was grinding his own Poor Dad down and swore to make sure that his Rich Dad taught him the secrets of wealth creation and wealth management.
"Rich Dad Poor Dad" tells the story and has great advice for everyone - both in terms of running their own lives and also for encouraging their children down the right career path so that they avoid the rat race.
Summary - Read The Rich Dad Poor Dad Book
Rich Dad Poor Dad is very strongly recommended and many people have raved to me about it.
I know that the book has changed many people's lives and it includes many invaluable tips on what to do about the problem.
You'll have to read the Rich Dad PoorDad book to find out more but you can get it from Amazon UK and USA.
At least click over and see the reviews - most of them are stunning! Over 2,000 people have been inspired to review the book. Some are not so good but there are 1,000 5 star reviews when I wrote this blog. Many people absolutely love Rich Dad Poor Dad.
Some reviewers thought the book was over-rated while others didn't agree with specific advice. For the price of the Rich Dad Poor Dad book it's worth finding out if people are right isn't it?
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Rich Dad Poor Dad is one of the books they have summarised.
Have you read Rich Dad Poor Dad and if so how has it benefited you? It would be great if you could share your story by adding a comment.
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