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Rich Dad Poor Dad Thoughts?
On a vacation to Whistler this past week I managed to read Rich Dad, Poor Dad (in between shredding the slopes) and thought that it was an interesting read. The concept of the rich buy assets versus buying liabilities made common sense even though I never thought to put it into words that way. And his discussion about always paying himself first.
How can he do that?! Is he saying that he always pays his salary first before all debt? And what kind of liabilities is he talking about? I mean people like nice things, but nice things arent generally good investments (i.e. boats, cars, diamonds).
What do you guys do? How do you incorporate the Rich Dad Poor Dad philosophy into your business?
Somebody mentioned the personal residence and how some would argue it is an asset and some the other way. Even if it is paid off, you still have taxes, insurance, utilities, lawn care, etc. So, it is a liability UNLESS it produced income in excess of the expenses.
I respectfully disagree with the definition. A paid off personal residence can still be an asset even though you are paying taxes, insurance, utilities, etc. because in a lot of cases the opportunity cost (renting a house) will be higher than paying these expenses. It would be a liability if it were sitting vacant and the annual appreciation did not exceed the total annual expenses for the upkeep.
#2 Mobile Home Park Investing Contributor
- San Antonio, TX
The book was a game changer for me personally. As @Ali Boone stated, I wouldn't be where I am today without having read it. Unfortunately, many tend to gravitate towards the "how-to" when the "why" is so much more important. Having a strong "why" will eventually give one the passion and motivation needed to learn the "how-to" which is the ultimate formula for success. Just my thoughts! :)
@Account Closed While your opinion is duly noted, and I agree that the opportunity cost is higher to rent elsewhere in most cases, the fact is, under the definition by the International Accounting Standards Board, the example would fall under a liability. Here is a copy of part of the definition:
"A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits."
Therefore, the enterprise, which in the case of our sample is the homeowner of the free and clear home, has a present obligation (the payments of taxes, insurance, utilities) arising from past events (the purchase of the property) who is gaining an economic benefit (place to live) resulting from the outflow of resources (cash paid out) from the enterprise (homeowner),
So while I agree the homeowner is gaining a benefit and also has equity in the home, the property itself remains a liability until that home is sold or somehow produces income in excess of the expenses.
"A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits."
In the definition, the keyword is "settlement." If the owner of a free and clear house were to "settle" the house, the result will be an inflow, not an outflow.
International Accounting Standard Board defines an asset as:
"An asset is a resource controlled by the enterprise as a result of past events from which future economic benefits are expected to flow to the enterprise."
An asset (free and clear house) is a resource controlled by the enterprise (the homeowner) as a result of past events (the purchase of the house) from which future economic benefits (cash inflow from sale) are expected to flow to the enterprise.
Let me ask you this, if you own a free and clear house and you are making a net worth statement for yourself, where would you list the free and clear house? Under Liability or Asset?
A free and clear house is cash flow negative asset, but an asset nonetheless.
This thread is about Rich Dad Poor Dad. That book defines an asset as anything that puts money in your pocket, whether you work or not, and a liability as anything that takes money out of your pocket. That's not the standard defintion. The book is trying to make a point.
The Rich Dad Poor Dad book resonated with a lot of people and got them started on the path to real estate. It doesn't tell you how to do it.
@Justin B.
I've heard the conspiracy theories since the book came out and to me, I don't care if he has a rich/poor dad, made up the story, or never invested in real estate. Story telling is an effective way to get a point across.
@Dev Horn says the secret, if you can call it that, is knowledge and motivation. I would agree.
Back when it was written especially, many Americans were buying tons of stuff (he calls them doo dads) and thought their house was their biggest asset. Reminds me of the bumper sticker "He who dies with the most toys wins" or George Carlin - The new American pass time is consumption - maxing out your credit card buying things you don't need with money you don't have.
So the book basically turns that way of thinking on it's head. An asset puts money in your pocket, whether you work or not, and a liability takes money away - therefore, if you're paying a big mortgage payment, it's a liability not an asset. It's a simple idea, but many people just don't seem to get it. If you're in the rat race paying for stuff, if you lose your job, money stops, and everything goes crashing down around you. It also tries to shatter the standard mantra - go to college, get a high paying job, invest for the long term, which hasn't worked out for a lot of people. He also points out the difference between net worth, good debt and bad debt, and financial wealth - the ability to stop working while money keeps coming in to support you. The whole idea is about positive cashflow, which is what buy and hold real estate investing is all about. It's not about flipping or speculating on appreciation.
So, the book advocates getting money working for you instead of you working for money. An asset feeds you, a liability eats you. It doesn't matter if you make a lot of money with a high paying job if you just end up spending more everytime you get a raise, which seems to be the pattern for a lot of people. It's not how much money you make but how much you keep that matters.
Like any book or guru, you have to take what is said with a grain of salt. All the advice may not be good for every situation. Use your brain! Ask for help here on BP. There are a lot of other books out there that give you the mechanics of real estate investing. The point is it inspired many people to look to real estate investing as a way to get out of the rat race and to get money coming in. It tries to provide encouragement and inspiration with sayings like, don't say "I can't afford it". Turn it into a question and say, "How can I afford it."
Originally posted by @Gerald K.:
@Justin B.
I've heard the conspiracy theories since the book came out and to me, I don't care if he has a rich/poor dad, made up the story, or never invested in real estate. Story telling is an effective way to get a point across.
I agree about the book. That book is the single thing that turned me on to my current way of thinking and the reason I am where I am today. It was the beginning for me. It just gets under my skin when someone says something as absolute truth when there's no proof and that's what Duncan did. It's a pet peeve of mine, that's all.
Robert Kiyosaki has said over and over the story is true (albeit I'm sure minor details were changed to provide privacy). *If* it was ever proved that Rich Dad never existed and/or the book was mostly false, it would cause me to lose a lot of respect for him. If it was false and he said it was false up front and he's trying to get a point across (a very good one) that would be fine too. But he didn't. He says it's true and I will believe that until it's otherwise proven different (and as I've said, a single vague quote from 11 years ago isn't it). That's all :)
@Account Closed I don't disagree with what you have stated, but let me clarify what I may not have clearly done in my last two posts. This topic is about Rich Dad books and as such, my posts were based on what he was attempting to get across in his books, including cash flow quadrant.
To specifically answer your question, I would classify the free and clear home as an asset IF we were talking about the balance sheet, but on the income and expense sheet, it would be a liability as it has costs associated with holding it.
Is there anyone who can post a link to the actual Smart Money article? I have not been able to find it anywhere. I have found tons of articles where Kiyosaki says Rich Dad is a real person and only a "reference" to this smart money article with a vague quote in 100 different places. I'd love to read the entire article so I can get context around it. Also, 90% of these references have the EXACT same wording around the paragraph. It's like someone initially wrote an article about this and everyone else just copied it. I can't find any unique opinions about it. It's funny how different people have just cut and copied this info. I even found several websites that were worded exactly like Duncan put in his post (the ENTIRE paragraph).
http://kschang.hubpages.com/hub/Robert-Kiyosaki-May-Not-Be-the-Financial-Genius-You-Think-He-Is
http://fxalso.com/?p=1203
I'm willing to listen to anyone's argument about anything, but I want to read the article to get the context behind it.
May I ask why it is of concern to you if there is or is not a "Rich Dad"? For me, regardless if it was made up or not, the message in the book to change the way you think and try to operate from the right side of the cash flow quadrant is a great message. Regardless if it was fictional or not, the message was real and a great one, I for one of many thousands took away from it what I believe was intended.
The books are one thing, these Rich Dad seminars that are put on are quite another. I personally believe that would be investors should stay clear of them, they are nothing but scams to fleece you from your hard earned money.
Originally posted by @Will Barnard:
The books are one thing, these Rich Dad seminars that are put on are quite another. I personally believe that would be investors should stay clear of them, they are nothing but scams to fleece you from your hard earned money.
Because it matters to me. Yes, I agree the lessons are valuable, but I don't like being lied to. Personally, I don't think I am being lied to so I'm just trying to do my due diligence. I do find it very odd that I cannot find this entire article anywhere. There should be no reason why this article doesn't seem to exist on the Internet. It leads me to believe that the context is different than the quote itself seems to lead one to believe.
So again, yes I fully agree with the concept and the teachings, but if Rich Dad turns out to be made up, I'll lose all respect for Robert Kiyosaki, but I do not believe this is the case.
Originally posted by @Justin B.:
I do find it very odd that I cannot find this entire article anywhere. There should be no reason why this article doesn't seem to exist on the Internet. It leads me to believe that the context is different than the quote itself seems to lead one to believe.
So again, yes I fully agree with the concept and the teachings, but if Rich Dad turns out to be made up, I'll lose all respect for Robert Kiyosaki, but I do not believe this is the case.
You find it odd you can't find an article online that was published by a magazine that stopped print publication several years ago and was merged into another one?
Okay, go to your local public library. Go up to the reference desk and tell then you need the microfilm for the SmartMoney magazine for February 2003. I'm 100% certain the nice people there can help you find it. If not, let me know what library you tried and I will have someone go to a library, get a copy, scan it and put it on my blog. But, I expect you to at least try before I spend the money.
For me it goes to his credibility. I'm not going to continue to beat this very dead horse but if you lie about small things you will lie about bigger things. RK has lied about both large and small things.
Great points and examples you will in counter in this real estate market
Originally posted by @Will Barnard:
@Account Closed I don't disagree with what you have stated, but let me clarify what I may not have clearly done in my last two posts. This topic is about Rich Dad books and as such, my posts were based on what he was attempting to get across in his books, including cash flow quadrant.
To specifically answer your question, I would classify the free and clear home as an asset IF we were talking about the balance sheet, but on the income and expense sheet, it would be a liability as it has costs associated with holding it.
@Will Barnard That's fair and I agree that the topic is about Rich Dad Poor Dad books and in that context what you say makes sense.
You find it odd you can't find an article online that was published by a magazine that stopped print publication several years ago and was merged into another one?
Okay, go to your local public library. Go up to the reference desk and tell then you need the microfilm for the SmartMoney magazine for February 2003. I'm 100% certain the nice people there can help you find it. If not, let me know what library you tried and I will have someone go to a library, get a copy, scan it and put it on my blog. But, I expect you to at least try before I spend the money.
Well yea, I find it very odd. You're telling me there is no trace on the Internet of the *1* article that has the only quote ever by Robert Kiyosaki that is construed as him admitting that Rich Dad doesn't exist? Yea, that article should be EVERYWHERE. I found at least 100 places where that quote is used. In order to use the quote, you have to have the original article right? Or maybe everyone just found it in one place and cut and copied (which would explain the similar wording, outside of the quote itself, I found across most of the sites.) And yet, no one who uses that quote has the article or a link to that article anywhere? So yea, very strange....
And you don't find it odd that you are basing your argument that Rich dad doesn't exist off a single quote from an article you haven't read (so you don't have the context around the quotes) and ignoring all the other times where he said Rich dad is a real person? And I'm focused solely on that statement you made where it's "widely" documented that Rich Dad isn't real (That's just not true. There is one quote and no context behind it). I actually agree with you that his seminars are probably crap (first because he's never there) and I'm ok with your opinion that he's a horrible teacher. I've never been "taught" by him so I have no opinion either way. I've just read his books.
I think why a lot of people are huge fans of RDPD book is because the book talks common sense. I read it a long time ago and my takeaway was:
Spend your money wisely. If you get a paycheck, don't spend it all on wants, save some and invest.
Because of the author's background and interest, the book is considered a good real estate book.
I think it's a good personal finance book in that it makes you think about money and future needs.
Whether "Rich Dad" is real or not is not as important as the overall ideas the book talks about.
I would compare RDPD book to "The Richest Man in Babylon."
Save a percentage of your income and invest wisely.
@Justin B. asking a Non-Rich Dad believer to prove Rich Dad doesn't exist is a bit like asking an atheist to prove there is no God.
The people who claim something does exist should provide the evidence to support such a belief. Now for a Christian to prove there is a God can be quite a challenge, but there is ample evidence they can point to. For Kyisoki to prove the existence of Rich Dad would not be very difficult, but the believers as well as the unbelievers have not been able to find any evidence.
I have seen the value of the book and the trans formative effect it has had on peoples thinking. Years ago, we used to sit in a cafe and play the cash flow game for hours and hours every weekend, it stirred up some interesting conversation, and transformed many a young mind.
Although I see value the book has had for many, after having looked at the evidence, it would seem that it is easier for an atheist to find evidence that God exists, then for anyone who does a bit of research to believe RICH DAD exists.
If you have to cling to the idea that Rich Dad exists keep reading the books and keep the faith, and stay away from real evidence and especially the Rich Dad analysis by John T Reed.
I absolutely can't believe how many followers RK has.
That so many people I respect on here seem to have gained so much from him really tells me that financial education is so horrible in this country that RK's terrible book being popular is still a good thing for so many people.
I don't see how anyone can respect him when he clearly recommends cheating on your taxes - he says to expense a Rolex, right? He lost me right there, its indefensible and shows terrible character. I don't care that he was your first cheerleader and nobody ever taught you anything about money, find another inspiration and leave RK in the loser pile.
I read the book, it was terrible and made me angry, he is dismissive of hard work and is dishonest and advocates dishonesty.
I think some of you who took this book as inspiration and then bettered yourself, should go back an re-read it now that you have educated yourself and done business and become successful. I doubt you are living has he advocates or that you would even give him the time of day if he showed up in your life espousing his beliefs.
I think I just puked in my mouth a little bit.
Great book but the saying those who teach and there are those who do, he is a great teacher
Originally posted by @Will Barnard:
May I ask why it is of concern to you if there is or is not a "Rich Dad"? For me, regardless if it was made up or not, the message in the book to change the way you think and try to operate from the right side of the cash flow quadrant is a great message. Regardless if it was fictional or not, the message was real and a great one, I for one of many thousands took away from it what I believe was intended.
The books are one thing, these Rich Dad seminars that are put on are quite another. I personally believe that would be investors should stay clear of them, they are nothing but scams to fleece you from your hard earned money.
I agree with Will.
He's an author. Poetic license? - The freedom to depart from the facts of a matter or from the conventional rules of language when speaking or writing in order to create an effect.
It was the number 1 book recommended on BP podcasts:
Originally posted by @Justin B.:
Originally posted by @Duncan Taylor You find it odd you can't find an article online that was published by a magazine that stopped print publication several years ago and was merged into another one?
Well yea, I find it very odd. You're telling me there is no trace on the Internet of the *1* article that has the only quote ever by Robert Kiyosaki that is construed as him admitting that Rich Dad doesn't exist? Yea, that article should be EVERYWHERE. I found at least 100 places where that quote is used. In order to use the quote, you have to have the original article right? Or maybe everyone just found it in one place and cut and copied (which would explain the similar wording, outside of the quote itself, I found across most of the sites.) And yet, no one who uses that quote has the article or a link to that article anywhere? So yea, very strange....
And you don't find it odd that you are basing your argument that Rich dad doesn't exist off a single quote from an article you haven't read (so you don't have the context around the quotes) and ignoring all the other times where he said Rich dad is a real person? And I'm focused solely on that statement you made where it's "widely" documented that Rich Dad isn't real (That's just not true. There is one quote and no context behind it). I actually agree with you that his seminars are probably crap (first because he's never there) and I'm ok with your opinion that he's a horrible teacher. I've never been "taught" by him so I have no opinion either way. I've just read his books.
I know we are accustomed to everything being on-line but some things just aren't or aren't indexed by the search engines or as in this case aren't any longer after the Smart Money site was merge into the Market Watch site.
But, you act like it is unavailable anywhere.
I'm not basing my argument that Rich Dad doesn't exist just on that article. It is widely documented.
In his book Rich Dad, Poor Dad, RK says that "Rich Dad" was the best teacher ever but in other books it was a different person.
Some of his advice in that book is illegal, like where he says to have rich friends who can give you insider information on trading stocks.
He advocates tax fraud telling people to deduct vacations and spa memberships.
On one hand he says the rich are driven by fear and the richer they get the more fear they have. Elsewhere, he says the rich are rich because we don't have fear.
During the Smart Money interview, which I have a printed copy of btw, he claimed he had done several highly profitable deals in Phoenix. But, the investigators with Smart Money couldn't find any records of them. When they asked him about it, his response was, "I don't pay attention to those things."
RK claims to have taken Yamana Resources public but the records PROVE he had nothing to do with it other than as a stock owner and he bought that stock 6 years after it went public.
He claims to keep everything private to avoid lawsuits while running around the country telling everyone how much money he has.
As I said before, he has lied about large and small things. His credibility is shot.
I can go on, but it is really pointless. RK fanboys and fangirls aren't interested in it. If you got something valuable from the book, more power to you, but check and double check the advice in there before you try to use it.
I don't know, I'm just a hick from the hills, but when I read something I tend to have the ability to learn from the good and discard the rest. I can't remember all of the details about the original RDPD book, but if it says to do some things that are illegal or whatever, I'm sure that I just ignored that part anyway (probably why I can't remember those details). That's what we all do isn't it? Or isn't that what we are supposed to do? Read a lot, learn from the good, ignore the bad? Hell, even this hill-billy can do that.
I have some solid Christian friends who devour the Atlas Shrugged stuff, even though the author is widely thought to be an atheist. And I have another friend who will not even entertain the thought of even beginning to learn anything from her because she is an atheist (or at least thought to be). Personally, I've read enough of the Bible and understand and believe it well enough that I can also learn from Rand if I chose to. Obviously, I won't believe everything that she says, and won't follow all of it either. But, I'm sure that I can learn from her.
Can't one do the same with RDPD? Are we not capable, of reading a book and discerning for ourselves what portions have value, and what portions are bunk? If this hill-billy can do it, surely the rest of y'all can too.
Ok, I think I'm done. I've spent too much time on this. Let's just agree to disagree :)
As with any topic, there are definitely people on both sides of the love/hate relationship with RK (and probably any Guru). Just like a previous poster compared to the god/atheist argument, we have one side going, "You prove he does exist" and the other side going, "No, you prove he doesn't exists". It is what it is.
I think the thread can come to an end now :)
@Bryan L. Good and valid points, I think most bright and intelligent people read a lot and sort the wheat from the chaff so to speak, no matter who is providing it.
If people believed everything they read on bigger pockets, they would also be in a heap of trouble. I suspect the posts on bigger pockets if you did an analysis, probably provide as much bad or illegal advise as does Kiyazaki, yet we all come back and keep perusing the threads for nuggets of truth a midst a significant amount of --------.
I do recognize the difference with bigger-pockets, typically someone comes back and counters bad or illegal advise with correct information, but not always.
People on bigger pockets are subject to some crappy advise just like they are with RD, but we remain a loyal group of ardent followers of BiggerPockets, and maybe its because unlike with the challenge of proving that RICH DAD or God exist, we have solid evidence that the gods of the Real Estate Forums, Brandon and Josh do exist!
Come to think about it, I have only seen videos that appeared to confirm that! I have never actually seen them, but the evidence seems solid enough for me to be a believer.
I agree most people should be able to read a book and pull the good and leave the bad behind.
My problem is how much credit this terrible book is given by so many people, and that it is a 'top recommended book' and all that.
Its a terrible book that anyone with any kind of financial education will cringe when they read it. The fact that so many people had basically no clue about money at all is what's really sad, you all read this horrible book - and it was the first time you got the concept of 'saving money gives you power and freedom' or 'money is a tool' ?
I'd much prefer if The Millionaire Next Door was the top recommended book - its written by a statistician and is backed up by real data. It does not put forth piles of fallacies, straw men, etc... to make points that are of dubious truth, it is not full of anecdotal stories that were modified to make a point.
But I don't get to choose, and its not just a problem here - the problem is that in real life, there are many of you who started with absolutely zero clue, and the RK enthusiasts are at least out there running around talking about money and encouraging people to read this terrible book - and it does get out the message that money is powerful and you get that power by investing, not spending.
I'd love to hear from some of you who recommend this book: what did you learn from it, and then find that in the book and cite a passage that really taught you something.
@Ali Boone what did you learn?
@Justin B. what did you learn?
@Will Barnard you learned about operating in the right part of the cash flow quadrant? was it truly a novel idea to you when you read the book that you won't get rich by buying more cable channels? I know I'm being an azz here, and I guess maybe I'll get moderated out of here - but it drives me crazy. You are clearly a smart, driven, highly successful person. Before you read RDPD did you really think that fancier car leases was how you would get rich? What did you learn? Did people really NOT KNOW that living in a bigger/fancier house costs more money? they really thought that buying a bigger fancier house was how you MADE money?
@Account Closed His takeaway was:
Spend your money wisely. If you get a paycheck, don't spend it all on wants, save some and invest.
Really? nobody ever told you that? This is a 'great book' and a 'top recommendation' because it provides that gem of absolutely basic common sense? Did you not have parents? I think I learned that from winnie the pooh. My 9 year old knows this - he was told to learn it from cub scouts and I taught him that. I did not taught him to hate work, or to expense rolexes like RK says I would be teaching my kids.
I'm sorry - it infuriates me that this pathalogical liar is held up as 'helpful' and given credit by so many of you, and you continue to spread his thought cancer by recommending his books.
I believe RDPD is BAD ADVICE that HURTS PEOPLE - it tells people that the stock market is a zero sum game and that they should not invest in mutual funds or their company 401k.
Pushing the masses toward 'go in business for yourself' and 'go buy rental houses' is bad advice. Most people don't have the drive or the skills to succeed in those areas. Instead this book turns them away from a reliable proven path to a better life: using your company 401k to a life of chasing the dream where they blow their money on gurus, they buy loser houses from charlatans or take your duds off your hands. They scrounge together downpayments, then can't finish the projects. They overpay at auctions, they overpay for properties. You all profit from their mistakes, buying them out later when they have collapsed.
Every one of you who recommends this book is hurting a family somewhere. If you recommended a book that was not full of anti-stock nonsense and tax-cheating, and disrespect for honest work, you might be helping some.