A Financial Journey

Rich Dad Poor Dad

Rich Dad Poor Dad by Robert Kiyosaki

Rich Dad Poor Dad is over 20 years old now, and the best selling finance book, selling over 32 million copies, and still in print. I bought the updated version, which weirdly is a smaller format, making some of the charts and illustrations unreadable. Still, this is the single most important text I’ve read yet, and the one I expect to make the most difference. Much more of this to come.

Robert tells the story of his ‘poor’ dad, a clever, hard working academic, and his friend’s ‘rich’ dad, who owns businesses. Rich dad teaches Robert and his friend a series of lessons.

Rich Dad’s Lessons:

1. The Rich Don’t Work for Money

2. Your house is not an asset

3. Saving is for losers

4. Fear and self-doubt are your greatest barriers to success

5. Always think in terms of opportunities

…and more

The book illustrates some concepts I admit to not previously understanding. This includes how debt can be beneficial when used to buy assets, as it is not taxed (it took a while to get my head around that one!), and, controvertial, that a house is only an asset if it generates an income. Your home is a liability, as it costs you money.

An asset puts money in your pocket, a liability takes money out. I like that explanation.

So what does it mean?

Robert is very much against the default got to school, get a good education, get a good job, and retire at some point, hopefully with a bit of money scenario. He is very scathing of the education system in the US (which I don’t think is much different in this respect to the UK, where we are (or at least weren’t in the 80’s) taught about how money actually works, the power of compounding, the destructive power of inflation etc. He very much advocates self-education. And that’s what I’m doing!

An interesting point he makes is that all rich people he has met have at some point lost money. Most poor people haven’t. The lesson? Sometimes we need to take risks.

There’s a handy animated guide here if you wish to skip the book (though I would recommend reading it).