RICH DAD POOR DAD
A COMMON MAN'S REVIEW
I read Rich Dad Poor Dad by Robert T. Kiyosaki for the first time in 2001 when I was living in Mumbai, India. A friend of mine gave it to me. This was my first contact with Kiyosaki’s ideology.
The book was so impressive that I could not put it down until it was finished. I reread it over and over again till the seven lessens of the book became like the Ten Commandments to me.
I am not a professional book reviewer. My writing skills are just as good as most of the Rich Dad fans. Anyway, here we go.
Rich Dad Poor Dad is written by Robert T. Kiyosaki with Sharon L. Letcher. Sharon is his CPA.
The book is dedicated to ‘all parents everywhere, a child’s most important teachers.’ And the book is about ‘What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not’
The Introduction is by Sharon Letcher. She describes her early years of education, career as an accountant and financial struggles despite of her high paying jobs. Later she meets Kiyosaki who impresses with his ideas. She agrees to co-author the book.
The book Rich Dad Poor Dad is fashioned as a narration in first person by Robert Kiyosaki. In the first chapter he introduces his two dads – rich dad and poor dad.
Poor dad is his biological father. He was highly educated and intelligent. He was a Ph.D who went to prestigious universities on full scholarships. The Rich dad was his best friend’s father. He never finished the eighth grade.
Rich Dad Poor Dad is about the contrasting points of view these two men about money. Kiyosaki had the chance to listen to the advice of both these men. Following the lessons taught by his rich dad he could build a financial empire that allowed him to retire when he was still young. This enabled him to take up the mission of developing products, services, systems and companies that helps general public to be financially literate. In his opinion financial literacy is the first step in getting out of the financial rat race.
There are six chapters in the book each one elaborating on a lesson taught by the rich dad.
Lesson # 1: The Rich Don’t Work for Money
This chapter of Rich Dad Poor Dad describes the Robert’s childhood experiences of being poor despite of having a highly paid father who had a senior position in a government department in Hawai. His father never considered them to be well off and advised him to learn to make money to be rich.
He partnered with his best friend Mike to make money by molding toothpaste tubes in to coins. This experiment failed and Mike suggested going to his father, a rich man, for advice. The Rich Dad agreed to teach them how to make money and offered them a low paying job in one of his convenience stores.
After months of struggling he confronted the Rich Dad and asked for a raise. The Rich Dad told him this was the trap the working class falls into. Greed and fear influence their decisions. Some get greedy and think more money can solve their problems. So they are always on the look out of higher paying jobs. Some fear of loosing what ever they have now and settle for what ever they are getting. Both lead to financial problems.
The rich do not do it. They do not trade in their hours for money. Instead their businesses and investments work for them. They make money even if they do not work. They don’t work for money; but their money does.
Following this advice Robert and Mike set up a comic book rental business that worked and made money for them despite of their absence.
They learned the first lesson: The rich don’t work for money.
Lesson #2: Why Teach Financial Literacy?
This chapter of Rich Dad Poor Dad talks about the differences between assets and liabilities. One has to be financially literate to differentiate between them. The chapter starts with many examples of super rich going penniless because of the lack of financial understanding.
According to Kiyosaki an asset is something that puts money into your pocket month after month. A liability takes money away from you. Is a house an asset or a liability? A house has many expenses related to it – mortgage, taxes, maintenance…. and it is a liability. The same house can be an asset if it is rented out and you get the rent every month.
The chapter introduces a very simple and useful graphical representation of assets and liabilities and how they are related to income and expenses. Cash flow patterns of assets and liabilities are described.
The rich buy assets.
The poor has only expenses.
The middle class buys liabilities and they think they are assets.
Lesson #3: Mind Your Own Business
As per Rich Dad Poor Dad people think a raise, a higher paying job or a second job can solve your financial problems. They buy gadgets they can hardly afford thinking that they are assets. They are running quicker in the rat race, but not moving ahead.
Save money, not to buy doodads; but invest in building businesses and assets that work for you. One should try to build his own business, not to work for someone else’s buiness.
Lesson #4: The History of Taxes and the Power of Corporations
The differences between the rich and poor in the way they pay taxes are explained in this. Tax laws around the world are written in favour of corporations. They earn, spend and pay the taxes last. But individuals have to pay taxes before they spend.
The rich build corporations that own their assets. This way they get tax benefits and protection from lawsuits. One should try to learn as much as possible about accounting, investing, markets and the law while trying to get financially educated.
Lesson#5: The Rich Invent Money
Acording to Rich Dad Poor Dad money is not real. It is an idea. Poor and middle class work for money. But the rich create it.
Mind is the single most powerful asset we have. If trained well, it can create enormous wealth quickly. Meaning of wealth changed continuously over the centuries. Wealth meant cattle, farm land, buildings, and production factories and so on. It is
Lesson#6: Work to Learn – Don’t Work for Money
Popular belief that specialization makes you more money could be true if you plan to be an employee your entire life.
Rich Dad encouraged Kiyosaki to do the opposite and to ‘a little about a lot’. One should work for the experience it gives rather than for money.
Following his advice Kiyosaki took up many different jobs even though he did not plan to pursue career in that field. Try to have experience in accounting, investing, markets, law, sales and people management
The Other three chapters offers tips on getting started, list of to-do’s and a plan to pay a child’s education for only US$7,000.
Rich Dad Poor Dad does challenge some conventional ideas about money. It defines an asset and a liability very clearly. The ideas have been well organized. The presentation is catchy and absorbing.
Even though the book is filled with the personal success stories of Kiyosaki in real estate, there are hardly any specific tips. Nor are there any investment guidelines he advocate. If you are looking for a how-to guide, you will be disappointed.
Overall Rich Dad Poor Dad is a great book, but dont expect it teach you the methods Robert T. Kiyosaki used to get rich.
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