So I was conversing with a friend who had just read Robert Kiyosaki's famous book - "Rich Dad Poor Dad" and I shared my two cent dividend on Robert's book with him.
My brother had bought "Rich Dad Poor Dad" back in 2001 when I was in college and I had a chance to read it during that time. I must admit that this was the first book that got me looking at money, income and other elementary aspects of personal financial in a very different, unconventional way. I would recommend everyone to read this book to look at personal finance from an unconventional perspective and see the bigger picture in such an important aspect of one's life. There are various principles that will get you thinking in the right direction.
Having said that, I do look at most things from a critical perspective. I believe that once someone familiarizes themselves with different aspects of personal finance and various schools of thought around it, it is best that they set their own goals and methodologies that work best for their personality and temperament over following someone else to the letter uncritically.
- Make money work for you instead of you working for money: This way of thinking caught my attention because we're all living in this rat race to "make money". And it's a never ending rat race once you have bills upon bills and various other expenses.
- Look at everything as an asset and liability: Robert defined assets as anything that brings you money or "cash flow" and liabilities as "anything that makes you loose money". Now this also opened my horizon to think at any big purchase in terms of an asset or a liability. So much so that even when I bought a car a few years ago when single, I bought a 2 year old used 2 door hatchback Hyundai Accent with 1 year warranty left on it all cash instead of the Dodge Charger or Camero I was eye balling since I was young, single and building up a cash reserve with low expenses. I figured that I would pay less cash on the initial purchase and subsequent maintenance if I started out low key. I haven't bought a house yet either because I'm living in a small apartment paying low rent instead of owning a house, paying off debt and having all sorts of one time initial set up expenses and monthly overhead expenses and annual property tax payments. Though his definition of assets is a good reminder on how to spend wisely, it should be noted from an accounting perspective that an "asset" is essentially anything with intrinsic value and it need not always produce cash flow. Eg A plot of land, a company stock, a wooden shelf made out of rosewood that might sell at a premium years later.
- Too much focus on real estate: I felt there was a lot of emphasis on real estate which worked in the 90s and early 2000s but real estate, like any other asset class has its risks too. Many people followed his advise uncritically and even paid hundreds of dollars to attended Rich Dad Poor Dad seminars - they were flipping houses, taking loans and lost big during the housing collapse.
- Very critical of working a job: I got the impression that the book made it sound like working a job is not something that rich people do. However the reality is that many millionaires worked jobs. Former GE CEO Jack Welch and former HP CEO Carla Fione started working in their companies as low level employees and moved up the chain. I believe if you enjoy your work and have a steady income, it's something worth holding on to unless you feel you have a better working alternative and it shouldn't be looked down upon.
- A very material outlook towards being "rich": I also felt that there was a very material outlook towards wanting to be "rich" - make more money...and more money...and more money. I feel being happy, content and comfortable with your potential is an ideal goal that makes anyone "rich". One man's "poor" maybe another man's "rich".
- "Saving" is portrayed as a bad thing: I think a balance between saving and investing in assets that have potential for growth is a wise strategy. However, reading the book, you get the impression that people saving cash are losers. The main argument provided is that cash, doing nothing, will be lost to inflation. This is correct... however you should also realize that taking risky decisions with cash could also make you loose it. I believe a balanced approach would be to have enough cash for one year's worth of emergencies and an additional two to three months for immediate expenses incase you need a cushion due to some unforeseen event. It's only after the 2008 crisis that a lot of people realized that cash *can* be king.
This is a great book to get your perspectives opened up to an unconventional way of looking at money and personal finance. However, readers should keep in mind that what worked for Robert Kiyosaki may not work for someone else and you have to read this book with the intention of learning and gaining a different perspective and then fine tune your short term and long term goals keeping your personality and temperament in mind while making financial decisions. Lots of people look for the easiest way to get rich and then end up getting burned (see this investigative report on people who paid for Rich Dad Poor Dad seminars).
Until next time, happy investing!