I have just finished reading the book Rich Dad, Poor Dad by Robert T. Kiyosaki. As I was telling some acquaintances I was going to start a Personal Finance blog, I was advised to read the book. The title “Rich Dad, Poor Dad” did not sound entirely foreign to my ear, and in fact, I recall having seen an ad through Facebook for a “Rich Dad, Poor Dad” seminar. I never actually clicked on it so I thought this was the occasion to read the book and see what it was all about.
The book is supposed to be the story of the author who has two fathers: The first is his biological father – the poor dad – and the other is the father of his best friend, Mike – the rich dad. Both “fathers” have different approaches to money and the book revolves around their two opposite views on the topic. The Poor Dad is a highly educated man, works to earn money but still struggles to achieve his financial objectives due to a lack of financial literacy. The Rich Dad is an entrepreneur that taught Kiyosaki about being financially literate, minding his own business, taking advantage of the tax system, and building assets.
Six major lessons are presented throughout the book:
- The rich don’t work for money
- The importance of financial literacy
- Minding your own business
- Taxes and corporations
- The rich invent money
- Work to learn and not to work for money
As I recorded the book in my Goodreads profile I saw many opposite reviews: Most reviews are 4 and 5 stars but still about one-third of the views are 3 stars and below. I personally put 3 stars but would ideally give it 3,5 Stars (not possible in Goodreads) and here is my why chapter by chapter :
It is not the first Personal Finance book I read so I miss the first-time effect of reading such a book.
- The rich don’t work for money
I had a generally positive feeling, especially when reading this first bit which is the most inspiring. Kiyosaki explains how at a young age (9) he already is confronted with money and how he is getting frustrated about working hard for 10 cents an hour while missing the baseball games with his friends. This is the first lesson from his rich dad to make him understand he needs to think differently than the majority of people who work for money if he wants to become rich later. He needs to understand that the rich do not work for the money they let money work for them. This lesson is repeated throughout the book several times and this is a philosophy I support. Simply put, he tells the readers to invest in assets (Real estate and Stock portfolios) that will generate income.
- Why teach financial literacy
To the author, “An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket”. Put this way it is very simple for anyone to understand the difference between an asset and a liability. I agree with Mr. Kiyosaki that one should invest in cash-flow generating assets such as stocks, intellectual property, or why not garages. However, by this definition, your house is not an asset but a liability since it doesn’t generate income. This from a financial perspective is entirely wrong! (but he admits it) An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will yield future benefit. Your house or primary residence is thus an asset and the mortgage is the liability.
- Minding your own business
The main idea of this chapter is to spend your spare time not spending your hard-earned dinero, but building your asset column in the balance sheet. An important distinction Robert Kiyosaki makes is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The long-term rich, build their asset column first, it is the asset-generated income that buys them their luxuries. I could not agree more with the lesson from this chapter.
- The history of taxes and the power of corporations
While I understand that information is power when it comes to taxation and fiscality, as a European the book is not really helping. R. Kiyosaki already lost one point in my opinion when he explained that your primary residence is not an asset but here some items seemed like a fantasy. As a general rule and in every country one can deduct costs when linked to the professional activity within certain limits. If you are a mason you are entitled to deduct professional costs up to a certain extent (e.g.: tools, phone bills, fuel to go to your clients) as defined by your national fiscal laws. Here the author claims he deducted the cost of a Porsche,… while I am sure you can deduct some taxes and some costs related to owning a car for your business, I am surprised the US law does not consider a sportscar as unreasonable professional costs,…Regarding the 1031 tax-deferred exchange mechanism when selling a house with a profit as a way to dodge the taxes, I am no expert but the word deferred sounds more like delayed to me rather than avoided,… The lesson here is to understand how to use the taxes and laws at your advantage, yes fine I agree but the author lost in credibility here.
- The rich invent money
In this chapter, he tells about how he made quick money by buying houses at low prices and then sold these making huge profits by using the law to his advantage. How accurate this all is I am not sure, however, I see the idea behind and it is about identifying and inventing opportunities to earn passive income and creating cash. You can, of course, learn all about your local Real Estate market but more generally you can invent money through your rock band, your knitting skills, homemade arts, and crafts, monetizing your cooking blog,…The sky is the limit just go out and try to invent money. Saying this I remember that one punch line from the movie Glengarry Glen Ross: “They are sitting out there waiting to give you their money, are you gonna take it?“. (The scene is simply fabulous)
- Work to learn – Don´t work for money
In this part, he is talking about people that have great talent but do not get rich because they refuse to learn additional and relevant skills. For example, he advises a talented journalist to follow a sales course so she could sell her work more effectively and achieve her financial goals. She refuses as she does not want to go “so low” as to have to sell, she is a trained journalist after all. While not everyone is made to be an entrepreneur I concur with the author and strongly recommend educating oneself in financial intelligence or improve knowledge in your field. You will acquire new talents and it will transform the way you see things. In this chapter sadly he becomes arrogant towards people that prefer to stay employed and caught in the rat race, which was a bit displeasing to my taste. Not everyone ought to become rich or an entrepreneur, people are just different. On the other hand, one should not expect to become extremely wealthy by staying in a corporate job without building one´s assets.
Little funny note for my Norwegian friends: In this chapter, Mr. Kiyosaki talks about identifying new investment opportunities and says the following: “I keep seeking the emerging nations. Today my investment company invests in South American countries and Asian countries, as well as in Norway* and Russia.”
Conclusion should you read it?
For people interested in a superficial introduction on how to make money and attain financial freedom I would definitely recommend it. The style is simple, easy to read and if you are not used to this kind of book, it will challenge your “classic” view as a salaried employee. While some fundamental concepts made sense (investing in assets, learning about finance, creating your own opportunities,…) and the first chapter was inspiring, my positive impression already began to fade away at the second chapter. Another critic is that the author encourages to become an entrepreneur, to me this is not for everyone neither is entrepreneurship a guarantee of success. In my first job I worked with many small and medium-sized Enterprises, some would do extremely well, some would just struggle year after year and some barely made it. Escaping the rat race is one thing managing a successful start-up is another.
In conclusion, I was not blown away but would still recommend it to a personal finance “newbie”. Find out for yourself here!
And you, what were your impressions on the book?
Disclosure: This post may contain affiliate links. That means I may make a small commission (at no cost to you) if you make a purchase. This will help to support Joney Talks!
*the book was written in 1997
11 thoughts on “Book review : “Rich Dad, Poor Dad””
Joney, you should go to one of those free rich dad, poor dad seminars if you have the possibility. It’s a complete scam, but it’s interesting to see how they manipulate the audience. I went to one of those seminars in Norway and it’s quite entertaining.
Cher Monsieur Le directeur. Wow impressive to have directors looking at the blog! Anyway thanks for your inputs, I recently saw they were coming to Oslo in February and almost signed up but then after having read some reviews online it seemed to be a complete waste of time. The seminars seem to be more like selling pitches for the books and further courses. As such the Rich Dad, Poor Dad book besides some flawed financial definitions offers valuable teaching : invest in cash-flow producing assets, teach financial literacy, invent money… so it is unfortunate the seminars turn into a scam as you say. But if it is entertaining maybe I should go anyway, laugh at it while a beer afterwards with other attendees and actually promote my blog, that way it would still be useful! 🙂
(PS : Are you by any chance an ex-colleague of mine?)
Hello Monsieur le Directeur, guess what? I saw one of the seminars is coming up again in May in Oslo. I will just go and attend, and write my review on it! 🙂
Cool, interesting to see all the tricks they will apply. Don’t get brainwashed. 😉
I think there are some great takeaways in that book. The overarching ideas are good, however I think it does a disservice to new investors. It comes off as get rich quick.
Losers work for money!
Use other people money to get rich!
Again some good ideas but I think some other books are better to start with for new learners.
Hey Damnmillenial and thanks for stopping by! Yes I agree with you : take some of the good key lessons of the book and ignore the « get rich quick » flavored passages of the book. Any great book you recommend for beginners? I think I will Teach You To be Rich by Ramit Sethi is great and practical (covered here https://joneytalks.com/2018/03/03/the-book-i-wish-id-read-in-my-20s/). See you on Twitter! 😉