1,239 of 1,296 people found the following review helpful
Decent points from a self-promoter,
This review is from: Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not! (Paperback)
When he isn't engaged in his nearly incessant showboating, Kiyosaki actually gets down to some practical, all be it general, guidance on how to think about money:
* Probably the greatest insight is how to think about assets and liabilities. A million accountants scream in anguish, but a primary residence, with a large mortgage, high taxes and high fixed costs to top it off, is not an "asset" for Kiyosaki because it doesn't produce a positive cash flow. Instead, he lists several items, such as rental property, stocks, bonds, mutual funds, business partnerships with limited involvement, promissory notes and royalties (p. 89), that generate money and should be invested in.
* Don't get into large debt positions for non-necessities. Buy your luxury items for cash (p. 176). This is part of any sound financial planning and is taken to its logical endpoint by the authors of "The Millionaire Next Door."
* Watch out for the tax effect of your sales of real estate. In this sense, the book is out of date, since the tax laws were changed in the late 90s to permit up to $250,000 in capital gains ($500,000 for married couples) from the sale of a primary residence be exempt from federal tax, under certain circumstances. No longer must you rely on the 1031 "trading up" provision he describes, at least not exclusively.
* Fear can be utilized as a great motivator to act, as opposed to fear causing you to be a deer in the headlights of life.
However, before we all run off to leverage real estate to become gentlepeople of leisure, let's try to remember a few things.
* This book is written for one reason: to be earn the author money. Kiyosaki is even somewhat up-front about it, noting that royalties are one of the best assets for a person to have (p. 89). Therefore, you should be skeptical -- not cynical but merely skeptical -- about the advice he gives.
* For every Kiyosaki there's a multiple of people who crashed and burned in stock and real estate speculation, and the difference between the author and those people is due in some measure to chance.
* It is much easier to invest in undervalued, illiquid assets in downturns when you're already sitting on a pile of cash.
* Dropping our current jobs to do Kiyosaki's kind of analysis and investing does not make sense for most of us. After all, our jobs are, in Kiyosaki's sense, an "asset" because they generate positive cash flow.
* The principle of "paying yourself first" (p. 172) is not something to be applied inflexibly. Kiyosaki is giving everyone advice from a position that may not be applicable to everyone (p. 176). Yes, the idea of saving a portion of your income is a good idea, even an outstanding idea. But stiffing the tax man and your creditors is not, and unless you operate a business or are engaged in a profession where you can rapidly earn extra cash, it's not a good idea to try to scare yourself into coming up with a brilliant plan to pay them off. You might wind up with a solution like George Segal and Jane Fonda in "Fun With Dick and Jane."
* Beware the author's personal biases. If he truly believed that America is "on the course" to collapsing because the difference between the haves and have-nots is widening (p. 48), he'd be investing in foreign real estate, in gold and would hold a lot of money in cash. He's not. In fact, he does the exact opposite. He bets on American's long-term stability by purchasing real estate.
* The author casually talks about extremely risky investments, such as $5,000 investments returning $1,000,000, as if these were almost ordinary (p. 78). That's highly misleading. He does mention in the book that out of ten limited investments, a preponderance of his business investments "go nowhere" or completely fail, but that should be highlighted when those stratospheric returns are mentioned.
Overall, Kiyosaki has some good advice. However, do not think that you are likely to duplicate his personal experience to success. If you look at how he made his money, he essentially got rich holding real estate in the 70s, in Hawaii, as well as being one of the state's best salesmen. He was at the right place at the right time, with a particular important skill. He then had sufficient money in the 80s and 90s to be able to invest in real estate in the economic downturns. So his position does not correspond to most of ours.
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Showing 1-10 of 17 posts in this discussion
Initial post: Jan 2, 2012 6:16:43 AM PST
Great review discussing some of the issues with this book, thanks.
Posted on Feb 12, 2013 11:52:13 AM PST
B. Barrett says:
You saved me some time and money. Thank you.
Posted on Feb 25, 2013 5:48:02 AM PST
Last edited by the author on Feb 25, 2013 5:48:54 AM PST
Alan F. Sewell says:
Thanks, this is perhaps the best book review I have ever read as it gives a perfect short synopsis of the strenghts and weaknesses.
Posted on Apr 20, 2013 5:52:45 PM PDT
E. Hoefling says:
As a professional Financial Advisor, I'm pleased that someone put a warning label on this book. Yes, there's good philosophy and insight in there, but if a person follows the advice within without some sincere consideration to their personal situation versus the author's, I fear they'll be in for a rude, financial (and potentially life) damaging experience. In particular, this book is shocking around financial risk management.
Posted on Jul 17, 2013 9:42:56 AM PDT
Lynn Lockwood says:
You make vaild points; however, I have also attended some of his free 1 hour sessions. In those sessions, some of the concerns you point out are addressed.
In reply to an earlier post on Apr 24, 2014 1:08:51 PM PDT
Jeffrey Korte says:
That's great! Could you provide some examples? Thanks!
Posted on May 6, 2014 6:45:01 AM PDT
Eric Viele says:
Thank you for taking the time to write it.
Posted on Jul 4, 2014 6:04:39 AM PDT
Thank you for your time and effort, so very helpful and appreciated!
Posted on Sep 23, 2014 9:17:24 PM PDT
Hunter S. says:
Posted on Oct 1, 2014 2:17:01 PM PDT
Great overview, thanks.