Rich Dad Poor Dad by Robert T. Kiyosaki
The Book
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money-That the Poor and the Middle Class Do Not! – by Robert T. Kiyosaki
Personal finance author and lecturer Robert T. Kiyosaki developed his unique economic perspective from two very different influences – his two fathers. This text lays out Kiyosaki’s philosophy and his relationship with money.
Opinion on the book
This is objectively a bad book, I have to be honest. BUT it is a very good start if you’re all new and fresh, and want to tiptoe into the waters of self-employment, and investing, and just get smarter about money. At least it is what it did for me, a long time ago now, so I thought it would be a good start for our book per week.
This is not a book about methods (it tries to be though, but it’s very dangerous advice, like “use your own company to get you a tax free rolex”, which will land you in jail. Fast. I also believe at some point he advised to invest in subprimes because the interest were goods and the risks were low, although I’m not sure about that…), it’s about motivation and trying to get into the “rich” state of mind, meaning not be someone who just spend every penny into craps and don’t invest in anything.
The Book in One Sentence
Start making your money work for you, stop working for your money.
Quotes
“Money is a powerful force. Unfortunately, people use the power of money against them. If your financial intelligence is low, money will run all over you. It will be smarter than you. If money is smarter than you, you will work for it all your life. To be the master of money, you need to be smarter than it. Then money will do as it is told. It will obey you. Instead of being a slave to it, you will be the master of it. That is financial intelligence. ”
Notes
#1 – There is no such thing as job security anymore
The common belief in our society is “work hard in high school, then go to a good university and work even harder, then get a good job and everything will be fine for you”. But in real life, most of the time it ends up with a “what the hell will I do now” after university, or a “is this my life, really?” in mid-career of after losing a job.
Lose your illusion and realize that there is no such thing as job security (look at the rate of unemployment after university. I wish there were statistic showing how many people actually work in what they studied there), so you better do what you like and want.
This being said – and this is out of the book – if what you want in life is to be an accountant and work for a big company, a peaceful office job, then go for it, there’s nothing wrong with that. Not everybody can or want to be a multimillionaire. But if you become an accountant become daddy said so then you better rethink your options.
#2 – Assets and liabilities
The author’s idea is simple : you have an income, and there are two things you can do with it : buy assets or buy liabilities.
For example if you buy a car you just bought yourself a liability that’s going to cost you money every month. Same if you rent a house.
But if you decide to invest and buy let’s say a little four apartments house and rent three of them, then you just bought yourself an asset : it’s not costing you anything but it’s actually earning you money!
So the regular middle class go that way :
Income → Buy things → Income goes up → buy more things → Get fired → Can’t pay for things anymore
Whereas the ‘rich’ income looks like this :
Income → Buy assets → more income from assets → more assets
And so on. You want to rethink the way you spend. Your income can’t be limited by what your boss pays you.
#3 – Create
Another advice is to create your own company, and this for two reasons.
First reason is that your regular Joe does :
1) Earns Money
2) Pays Taxes
3) Spends money
while a company :
1) Earns Money
2) Spends Money
3) Pays Taxes
While this is very true indeed, you have to be careful not to merge your personal finances and your company finances or else this could land you in jail. Careful here. BUT you sure will get a discount the size of the VAT of your country for that nice computer you’ve been wanting if you put that into ‘company expenses’.
Second : Create a company to actually do things. Create something, a product, whatever. The idea here, at first, is not to actually make millions but to work on what the author calls your financial IQ, meaning your capabilities to ‘play’ with the concept of money, and thus get yourself the formation required to become an investor, since people who are not investors have no idea what it feels like to be trying to sell something. So get yourself out there and get on the other part of the deal for once! Be a seller!
#4 – Passive Income
The principal lesson of the book is this : get yourself out of the equation. Start making your money work for you, stop working for your money. Which means that whatever you choose to build, work on the system so you’re not the center of it.
This is key because if you just have to work more and more to keep up with the growth, what is the point of it? You just built yourself another liability in time. For example opening multiple restaurants is nice. Having a franchise where people open restaurants for you is even better.
#5 – Invest
After becoming a creator, the author says you should have learned enough to become an investor. That is the ultimate step to financial freedom. Investing means you’re not really ‘working’ anymore in the common sense of the term, but you’re making your money work for you. Examples of this activity is real estate investing, or investing into other companies.
On the fact that you need money to do that, the author advises to stop thinking of money binary. Don’t be afraid to make offers, just go for it, offends people. How do you know that house hasn’t been on sale for two years and the owner is not desperate? How do you know that banker won’t loan you that money for the down payment, and the other one the money to buy what’s left of the house to pay? You don’t. Go for it, a ‘no’ won’t kill you. Working your ass off without saving anything can. Period.
Why you should (or should not) buy that book
If you’re reading that newsletter I don’t really think you need to buy that book, much more interesting stuff is coming in the future.
The only good reason to buy it would be as a present for someone who is currently struggling with his finances and has no idea what he is doing wrong.
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~Thomas
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What about you? Have you read that book? What did you think of it?