There are a lot of gurus out there who claim they know the secret to wealth. Most of them are full of shit. In fact, many call Robert Kiyosaki insincere and critique his ideas, but I wanted to find out for myself. So I decided to get a copy of Rich Dad Poor Dad to see what the hype was all about.
As you may have guessed from the title, Kiyosaki had a ‘Poor Dad’ and a ‘Rich Dad’ (His friend’s father) growing up. The two had opposing viewpoints on personal finance, and this juxtaposition serves as the theme of the book.
His poor dad was well educated, but was a wage slave. He always worried about bills and could never buy nice things.
His ‘rich dad’ was not a scholar, but he was wealthy. He owned numerous stores and other assets and balked at the idea of working a job.
The idea of getting rich through owning assets and not working a job is not a new concept to me, but there were a lot of takeaways from the book. To start:
Being Rich (And Poor) is a Mindset
While we would label a person as ‘wealthy’ or ‘rich’ based on their bank accounts, it is mindset that will determine a person’s financial future. For example, in Think and grow Rich we learn about the Law of Attraction, and that if we are so committed to something it will inevitably come true. It comes down to how we perceive ourselves and our actions.
The same goes with being poor:
Even when [Rich Dad] was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
A Job Won’t Make You Rich
Getting a paycheck will never make you wealthy. Even if you have a lucrative salary, you’re still dependent on others for your financial well-bring.
People often hate on the wealthy, and scoff at owning a business, but they are ignorant of what it really means to be a wage slave.
I’ve met so many people who say, ‘Oh, I’m not interested in money.’ Yet they’ll work at a job for eight hours a day. That’s a denial of truth.
So why is it that so many people cling to a job? There are a multitude of reasons, but even for those with talent and drive, there is always a price that will get them to stay at the office.
Remember what I said before: A job is only a short-term solution to a long-term problem. Most people have only one problem in mind, and it’s short-term. It’s the bills at the end of the month… Money controls their lives…
Learn To Sell
Everyone could benefit from learning How to Sell. Even writers like myself.
Kiyosaki highlights an eye-opening example when he converses with a journalist. She inquires about how she can sell more books and he tells her she should attend a workshop on sales.
Anger flared from her eyes. “I’ll never stoop so low as to learn how to sell. People like you have no business writing. I am a professionally trained writer and you are a salesman. It is not fair,” she fumed.
This is a classic example of people thinking too much of themselves:
[Had] she diligently learned the skills of sales and marketing, her income would jump dramatically. If I were her, I would take some courses in advertising copywriting as well as sales. Then, instead of working at the newspaper, I would seek a job at an advertising agency. Even if it were a cut in pay, she would learn how to communicate in short-cuts that are used in successful advertising. She also would spend time learning public relations, an important skill. She would learn how to get millions in free publicity. Then, at night and on weekends, she could be writing her great novel. When it was finished, she would be better able to sell her book. Then, in a short while, she could be a “best-selling author.”
People often wonder how they can be rich and successful. Yet, even when a rich and successful person gives them advice they can’t even listen because their egos are so big!
Your Path to Financial Freedom
Kiyosaki’s path to success is more of a middleground in the approach to wealth building. It is much faster than the ‘Get Rich Slowly’ crowd (which is BS), but slower than MJ Demarco’s Millionaire Fastlane (which I’m currently reading).
The emphasis on getting wealthy here is not through starting a business, but rather acquiring assets. Lots of assets.
Kiyosaki’s approach is, again, not the fastest route. His own path took longer than he expected:
I wanted to be free by age 40, but it took me until I was 47, with many learning experiences along the way.
Perhaps I am more willing to take risks than the average reader. I would gladly quit my job sooner to work on a potential business idea. If that’s the path you also want to follow than start young.
Rich dad thought it best to go broke before 30. “You still have time to recover” was his advice.
Kiyosaki’s emphasis on assets is constant throughout, which is important to drive the point home. In doing so, he shares his love of two major assets:
Personally, I use two main vehicles to achieve financial growth: real estate and small-cap stocks.
Real estate is a classic example of acquiring assets. Buy a property, rent it out, pay off the mortgage and enjoy the cash flow. Yet, many today are questioning the idea of buying a home for financial purposes.
Fortunately, Kiyosaki clarifies this. The reason most people today question buying a home is because they say the costs of home-ownership do not benefit the buyer in the long run. This is something Kiyosaki agrees with and says that having a home is actually a liability! An asset, according to Kiyosaki, is something that produces positive cash flow. Owning a home does not produce that—you’re paying a mortgage to the bank. Therefore, it is a liability.
Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
I’m not real estate expert, but I find that current real estate prices are inflated and subject to another crash. If you can get a great deal on a property, especially at an auction than I would agree with Kiyosaki in making that investment.
I also liked the way Kiyosaki and his wife have their portfolio set up:
[Our property]…it is our own REIT, or real estate investment trust. We also own a stock portfolio, surrounded by a corporation that Kim and I call our “personal mutual fund.”
That’s the power of having a ton of assets.
As for the small-cap stocks, I also can’t speak to that. It is certainly risky, and I would rather have more control over my assets and potential wealth through starting my own business.
Advice for the Future
Besides acquiring assets, limiting liabilities and developing a wealthy mindset, Kiyosaki drops several nuggets of wisdom throughout. For example, he says “You want to know a little about a lot” and he harps on the power of information in today’s world.
This is why I am a huge advocate of reading.
Once you begin your path to financial freedom, you need to have an end goal in mind. Kiyosaki suggest that:
… for the average individual, a passive income of more than $ 100,000 a year is nice and not hard to achieve. Depending on the market and how smart you are, it could be done in five to 10 years.
With Rich Dad Poor Dad you will certainly be on the path to wealth faster than you were. His core points of acquiring assets is really going to get burned into your mind.
I don’t recommend reading a ton of ‘Get Rich’ books, but Rich Dad Poor Dad is a good guide to understanding wealth and your future.