Rich dad, Poor dad

Author: Robert T. Kiyosaki

My Rating: 4.6 / 5

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“Working hard for money is an old formula born in the day of cave man”

Go to school, get good grades, find a secured job, work hard, save money and retire – this has been the mantra of our life. But by following this mantra the middle class will remain as middle class only passing on the same cycle to the next generation. The reason for this (as the author puts it) is that we haven’t been thought financial intelligence in our schools i.e we haven’t been thought the art and science of making money. The author illustrates a few examples of how cash flow works and explains the differences between cash flows of poor, middle-class and rich people and thereby emphasizing why they are the way they are. It all comes down to how well we manage our asset columns. I would like to mention the highlights of this book.

Middle class/Poor vs Rich:

This difference comprises the core of the book. The author stresses on the fact how to make money work for you instead of working for money. He uses two terms viz. “Rat race” and “Fast track” predominantly throughout the book. The former refers to the mundane middle class habit of working hard at the job, paying bills and liabilities, saving in a conventional way not bothering to build on the asset column. In simplistic terms he defines asset as something which puts money in your pocket and liability as something which takes money out of your pocket. The latter refers to a smart habit which according to the author pushes people from middle class to the so called rich. It incorporates the idea of building our assets until our asset column alone is sufficient to meet our expenses with or without our day job. According to the author, assets are stocks, bonds, mutual funds, income generating real estate or anything that produces income, appreciates and has a ready market.

Playing safe vs Playing smart:

The author puts spotlight on the fact that many people never become rich because they show reluctance in taking risks and hence they make “safe investments“. But the problem with these investments is that they give very low returns. And of course the author acknowledges the fact that there is a higher risk involved when you make investments which have the potential to milk higher returns. But that is exactly where financial intelligence comes into picture. He further asserts that there is not a single rich person in this world who hasn’t lost money while experimenting. You lose, you learn from your mistakes, you learn new formulas and you invest again – this time more sophisticated. This is how smart people invest.

Controversial views:

The author contradicts the popular saying “Our home is our greatest asset“. Instead he views it as a liability unless you have generated an asset column which pays for the bank loan. A bigger house usually means higher expenses as we have to refurnish everything matching the requirements of it. What many people fail to consider is the property tax which will be incurred upon them. Also, we miss out on the opportunity to make other investments which would have grown faster in value simply because we have no money left to invest. Another controversial view is “Pay yourself first and others later“. Even at times when you realize that you will not have enough money left to pay bills, the author still asks you to pay yourself first. Our asset column should be far more important to us than anything else. He claims that it is a good money habit because when we pay ourselves first we get financially stronger and when we pay ourselves last, we let people like bosses, tax collectors, bill collectors and managers push us around all our lives. Though I wasn’t fully convinced with the author’s views personally, these insights gave me a different approach to look at the same topic.

Who can buy this book ?

Anyone who has a fire in their belly to become rich. But, doesn’t that mean everyone ?? No, it doesn’t. There is a fine line between people who have the desire to become rich and people who take steps towards it. The author illustrates by using an example that it is strange to see people who give 10 percent of bill as a tip but are hesitant to give 5 percent of fee to a broker. This book definitely serves as a great inspiration to take action but it alone isn’t sufficient. Personally, I would say it is a very good start for anyone who plans to invest.

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