Sunday, December 28, 2008

Rich Dad Poor Dad by Robert Kiyosaki

Felt a little bit guilty reading this one, as if I wanted to put a brown paper book-cover over it, so people couldn’t see me reading a pop-finances book For Dummies™. For whatever reason, though I enjoyed some of Kiyosaki’s articles in the past, I wanted to avoid feeling like a chump, so I avoided this book.

Finally though, I broke down and decided to read it in October. Like many of us, I suspect, finances and the economy are much on my mind in these troubled days.

Kiyosaki’s trope is simple; he had two father figures, one of whom was highly educated, the other of whom was an aggressive, successful businessman. Kiyosaki clearly learned more from the rich dad than from the educated dad. He tries to impart some of these core philosophical differences to the reader in two hundred pages of tortured English.

The core point here is: invest your money in assets which will return money to you. Don’t invest your money in expenses. Then, work to grow your assets, and be smart about using a corporate structure to avoid as many taxes as possible. It’s sound advice.

Key points:

1. You must think differently about money, about investing, about assets and liabilities than most people do if you want to get out of the rat race.

2. Your job, no matter how well it pays, is unlikely to ever make you rich. The nature of the deal is such that your cost of living is likely to increase with your wages, you pay so much to the government, and no matter how hard you work, there are only so many hours in a day.

3. By being smart about taking advantage of various tax structures, the power of incorporation, etc. you can help avoid some taxes, and help pay your expenses with pre-tax instead of post-taxed money. This will help.

4. You must above all understand the difference between an asset, which is something that returns you money without any effort from you, and liabilities, which are anything that cost you either time or money in upkeep. (Your home being the principal thing most people mistake for an asset.)

Overall, I agree with most of the lessons in this book. Money is power, though not an end unto itself. In order to get free from the rat race, one needs more than just the income they can derive from employment.

Now, my ability to put some of these lessons into practice is what I really need to spend time on instead of this navel gazing blog.

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