Rich Dad Poor Dad by Robert T Kiyosaki – Book Review

Rich Dad Poor Dad by Robert Kiyosaki is probably the most well known ‘how to be rich’ books ever written. And it’s also one that I have been putting off reading for a long time.

I hate the branding – “what the rich teach their kids about money that the poor and middle class do not!” – and there’s a sort of snobbish cult following around the book that I can’t stand. I have also read quite a bit of criticism that has left with an image that it just tells you to get big loans, buy lots of property and aggressively chase being rich while laughing at the stupidity of the poor folk.

But I keep hearing quotes from it that I actually really agree with. A few days ago I was listening to a podcast and heard the quote:

“It’s not how much money you make, it’s how much money you keep..”

Well, that makes sense and is pretty close to what I bang on about all the time. So I finally bit the bullet and cynically started reading.

But the more I read the more I found myself nodding along. I don’t agree with everything he says. I think he excuses away a lot of social responsibility and that his personal investment stories are unhelpful.

But that’s beside the point. Whether his anecdotes are true or not, the fundamental concepts and his way of thinking about money and work are spot on. He has basically put into better words a lot of the things I try and talk about on this blog. Concepts such as financial independence, passive income and early retirement.

Here are the main points I have taken away from Rich Dad Poor Dad.

Financial Literacy Is not Properly Taught At School

I couldn’t agree more. We are taught to save, but to save for what? Bigger, better and more stuff.

But we are never taught about investments. That those savings don’t need to be spent but can be put to work to earn more money.

And those investments can quite quickly grow to earn more than we can make from working.

Most people get stuck in a loop:

Swap your time for money in a job – save – buy something – start again

That’s a never ending loop that doesn’t depend on how much you earn. As you get promoted and bring in more money, you just increase your spending. Constantly resetting the net worth to zero, or less than zero with credit cards, mortgages and loans.

Kiyosaki says that people end up in this loop because they never learned ‘financial literacy’. He claims, and I agree, that everyone needs to learn financial literacy.

In fact, it is even more important if you’re not ‘materialistic’ or ‘don’t care about money’. Whether you like it or not, if you’re stuck in the above loop, then you are dependent on and a slave to money.

He defines wealth as the number of days you could survive at your current living standard if you lost your job today. If you can survive forever then you are financially independent. Unfortunately, most people, even those earning a fortune, couldn’t survive a month.

So how do you create wealth? In Rich Dad Poor Dad, Kiyosaki simplifies it by saying all you need to do is acquire assets and minimise liabilities.

Assets are anything that earns you money. Liabilities are anything that costs money.

Your Home Is Not An Asset

How many times have you heard people say that their home is their greatest investment?

A house and their employer’s pension is often the only investment that most people have. As soon as they have saved enough, they will upgrade to a bigger house.

Well by the Rich Dad Poor Dad definition, your home is not an asset and actually goes into the liabilities column. Living in a house costs you money and doesn’t earn you anything. Even if you don’t have a mortgage you are still paying for upkeep and taxes. The bigger house you have, the more it will cost.

We need shelter and to live somewhere. But don’t fool yourself into thinking that buying the biggest house you can is a good investment.

A house you have bought as an investment to rent out is an asset. A house you have bought to live in is not.

So if a house isn’t an investment what is?

Kiyosaki holds back from telling us what assets to buy (which is good because I disagree with a lot of his investments). But rather puts the focus on getting educated in investing and learning ‘the game’. He says your greatest asset is your mind and you should continually invest in improving it. Something else I agree with!

He personally has made most of his money from investment properties and small cap stocks and shares, but doesn’t say that is the only or best way. The important thing is to make sure that you are minimising your liabilities, growing your assets and learning financial literacy.

Actually, that’s not the most important thing. The most important thing is to:

Take Responsibility For Your Financial Future

Despite being written 20 years ago, I believe this is even more important now than then.

I’ve been hearing it said more and more that by the time my peers and I reach retirement age, there won’t be a retirement age and there won’t be any state pension. Well if that’s what you believe, what are you going to do about it?

My Facebook feed is full of wailing at our dismal future and complaining that the government doesn’t care. But there is almost no personal planning for that future.

Regardless of your political point of view, you can’t bury your head in the sand. We need to accept the facts of life and adapt. If you believe there is a chance that you will soon be without a safety net from the government or employer then you better get to work building your own safety net.

We have very little control over what anyone else decides to do. Our boss, the government, our neighbours. But we do have a lot of control over how we choose to spend our time and money. The best thing you can do is get to work.

If you don’t know where to start then feel free to have a browse round this blog. Here are some more detailed articles to get you started:

In Summary: I Highly Recommend Rich Dad Poor Dad

There we have it. There is plenty more good stuff in Rich Dad Poor Dad and I recommend reading it. But if you can’t be bothered, here is my summary in three sentences:

  • Take responsibility for your financial future.
  • Learn how to invest and improve your financial education.
  • Grow your money-making assets while shrinking your liabilities.
Summary
Review Date
Reviewed Item
Rich Dad Poor Dad by Robert T Kiyosaki
Author Rating
5
  • Philippe

    Great review Sam! I found this blog 1 month ago and it is amazing honestly. Keep it up!
    I’ll definitely give a try to this book. Thank you!!!!!

  • Moshe Heideman

    A home is a great investment though, if you don’t owe money on it. Going by his definition, in the event you lose your job, you can sell your home, get a new one and keep the difference – thereby making you money (asset) and enabling you to survive longer (wealth).

    • Christiaan Bekker

      The way I understand it, your comment is true, but selling an asset is less than ideal (especially if it is a house which might not sell very quickly depending on the location and the cycle). Also if you are in a hurry to sell (lost your job), you might be negotiated down since.

      However, the most important thing I took away from both the book and Sam’s review is that there is not a single one “right” way, and it is all about education and your personal circumstances.

  • Scott

    I completely disagree with his take on housing, but that’s probably because where I live. If you live in Silicon Valley without real estate exposure, you are missing the boat. Like starter homes going up 400k in the last three years. My home has gone up 800k in 10 years — and it’s nothing fancy. My previous house went up 900k in 3 years and I took the money and ran. I’m expecting another bump once the jobs go online at the new Apple HQ. Take that rich dad. Your blog is great Sam!

    • Haha nice. I think I’d be tempted to rent it out, move somewhere sunny and live off the income. Or maybe not, Silicon Valley must be a pretty interesting place to live.

  • David Hazell

    Have you read The richest man in Babylon?

    • Nope, is it worth reading?

      • David Hazell

        Yes, quite old – written in 1926 and is a bunch of stories about people in ancient Babylon, I enjoyed it!

    • Thanks Paddy. I’d read a few similar things which is why I was so reluctant to read the book to begin with. As I said in my review, I think that the concepts he teaches are really sounds – regardless of whether or not his stories are true.

  • Christiaan Bekker

    Awesome reading the review. I have read the book years ago, (and maybe I should read it again).

    I found RTK has a very simple way of explaining very complex ideas, and if you use his advice as a starting point there is only one way your net worth can go…

    PS. Saw him at a seminar earlier in 2016, there is a new edition coming out in 2017 (20 year anniversary) with some updated figures etc (but the main message will be the same).

  • Batalistic

    I highly recommend “The Millionaire Fastlane” by MJ DeMarco. He teaches what I call “Get Rich Early” which is not to be confused with Get Rich Fast Schemes. He disagrees with many of the financial gurus out there, Bob Kiyosaki included. His reason? The methods taught by most of these gurus are NOT the methods that made them wealthy. The author even has an open forum, The Fastlane Forum, where people share ideas and debate the principles gotten from the book. The forum is a book review in itself.

    In my opinion, it is the best book for getting into entrepreneurship as it lays a solid foundation for what lies ahead.