Ah, Rich Dad, Poor Dad
That said, it's also one of the most controversial personal finance books in existence, and most readers either love it or hate it, with very few falling in between. Kiyosaki's high-risk, actively-trading style certainly is in high contrast to my more passive, index-based style. So, now, more than a year and a half since I first encountered Rich Dad, Poor Dad, what's my take on the print version of this famed investment tome?
Summary
The book starts with an introduction to the differing philosophies of Kiyosaki's two ‘dads', his poor biological father, and his friend's rich dad (who might be entirely a metaphor). The next six chapters cover several of the lessons passed on by Rich Dad while teaching Kiyosaki how to be rich. The first lesson is that the rich don't work for money; rather they put their money to work for them, by investing in wealth generating vehicles. Many of the people who remain poor and middle class focus only on what they are currently earning through their work, rather than trying to lay a foundation so they no longer need to work.
The second lesson is to improve your financial literacy. Kiyosaki focuses primarily on knowing the difference between an asset (an investment that earns you money) and a liability (something that costs you money on an ongoing basis), and knowing to buy only assets. He goes on to note that a major reason most middle class people fall to become rich is that they purchase liabilities, which they mistake for assets.
The third lesson is to mind your business, buying assets (as Kiyosaki defines them) and using them to build your cash flow. This short chapter gives some suggestions of investment vehicles you can use to build your investment income. The fourth lesson covers the role of taxes and corporations in building your wealth. It is an overly simplified view, but provides the lesson that knowing the tax laws of your location can make the difference between success or failure of an investment.
The fifth lesson maintains that the rich invent money. He provides the story of buying a house worth $75,000 for merely $20,000 and selling it for $60,000, netting a $40,000 profit for his efforts. Through this and other examples, he stresses that through the use of intelligent investments, it's possible to generate high amounts of profits without putting in any of your own money.
The sixth and final lesson provided by the book is to work to learn, rather than working for money. Kiyosaki maintains that work should be done to improve your knowledge and expand your skills, but that you shouldn't depend on your job to supply you with enough money to meet all you needs. The last few chapters provide advice on overcoming obstacles and getting started in your investment career. The book ends with a story of how of one of Kiyosaki's neighbors used investments in real estate to provide for his son's education.
Pros
-Very Optimistic: Kiyosaki's writing is nothing if not very hopeful and assured of success for the reader's investment future (provided they follow his advice, of course). If you are feeling unsure or pessimistic about your ability to successfully invest and build up your net worth, a short read through Kiyosaki's works will generally leave you convinced that not only can you invest, but you can do so quickly and easily.
-Entertaining: While most investing and personal finance books are very dry and dull, Kiyosaki is an interesting, captivating writer. His books are rarely dull, and most of the lessons are explained in the form of colorful anecdotes. He teaches the point that the rich don't work for money by explaining how his ‘rich dad' told him to work without pay, and telling how it enabled him to come up a money-making plan all on his own.
Cons
-Overly Simplistic: Kiyosaki doesn't provide much detail into how to carry out the methods he suggests in his book, instead focusing more on a broad way of thinking. If you are seeking details of how to use any of the methods he methods in the course of the book, from purchasing real estate without a down payment to investing in tax lien certificates, you'll need to look elsewhere for a how to.
-Some Incorrect Advice: In the course of his book, several of the points that Kiyosaki addresses are either incorrect, or simplified to the point that they aren't that useful at all. This is probably most evident in the fourth lesson, covering corporations. He mentions how corporations can avoid taxation on their expenses, without covering the fact that corporate profits are subject to taxation at both the corporate and individual level. (For C corporations, at least.)
-Sometimes Condescending: At times during the book, Kiyosaki takes a tone that is rather insulting. Starting with how he wrote an entire book (and actually, created a media empire) by calling his father ‘Poor Dad', he has a tendency to talk about people who derive their income primarily through work as failures. He refers to workers as hamsters, calls the process of working for your income the ‘Rat Race', and denigrates the government. Add in the not so subtle jabs at anyone who doesn't use his methods to generate wealth, and there's a good chance you'll be insulted at some point during this book.
Overall
If you're looking for a source of inspiration during your investing life and have a rather thick skin, Rich Dad, Poor Dad
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