Rich Dad, Poor Dad is regarded as one of the most popular personal finance books of all time. Published in 2000, this book was written by American businessman and investor Robert Kiyosaki. It centers on the concept of increasing one’s financial and economic wealth by developing one’s financial intelligence which was communicated through a number of parables and stories. Its success came from an endorsement from the talk show host and media mogul Oprah Winfrey in her show Oprah. After showcasing it on the television program, the book has since then sold more than 26 million copies all over the world. It has alternately received countless praises, positive reviews from book critics, and has been a part of various top seller book lists. The book, in my view, points important concepts about money, how we get it, and how we spend. In fact, the book is ideal for beginners as well as for anyone who wants to change his perspective about money. But, much like all books, Rich Dad, Poor Dad, also has some upsides and downsides.

In terms of upsides, Kiyosaki explains the idea of personal financing using a very interesting approach wherein he compares his two fathers. The first one was his biological father – the poor dad; and his second father or the rich dad which was the father of his childhood best friend. The author proceeds by explaining that both figures taught him how to achieve success. The two however, have very different and disparate methods towards achieving financial success which is evident in their principles, beliefs, and practices surrounding money. The lessons of the book are divided into six parts. Each lessons or parts of the book both have their positives and negatives as well.

In the first few chapters of the book, Kiyosaki spends time explain the concept of a “rat race” which most people are part, but are unaware of. He does this by discussing the life of his poor dad, a highly educated man who is trapped in a vicious cycle. Despite of this educational achievement, the poor dad continues living in what Kiyosaki refers to as the “rat race. The “rat race”, according to the author, is a self-defeating cycle where in an employee works hard for his employer in order to receive compensation or income. Kiyosaki asserts, that oftentimes the main objective of the employee is to increase his income by gaining a promotion which is a actually a result of working harder for the employer. But as the income increases, so does the expenses and the debts. As a result, the employer becomes more reliant on his paycheck and are forced to work extra hard in order to get another promotion, increase his income, and pay off the debts. This then becomes a vicious cycle of working, spending, borrowing, and working again.

Kiyosaki believes that as a child, he, along with many others is conditioned to enter the “rate race”. At an early age, children are often told to work hard in school in order to get to a good college. After graduating, the child is then asked to look for a secure job with a good paycheck so that he can buy a house and other material possession. From there, the child learns to borrow money and eventually incurs debt, without seeing that his life is now becoming highly dependent on the process of working, buying, and working again. In other words, an individual because he needs to buy things and pays off debts becomes dependent on his employer for his economic welfare. The idea of a rat race is something that most people can relate to. In short, poor dad represents a large chunk of the population who works, spends, borrows, and works again. What is more interesting is that while many are part of the race, there are very few who are aware of it. Kiyosaki articulates this cycle in such a way that it confronts the readers of the reality that many of us are living. Kiyosaki, in this part of the book, reminds the readers that it is possible to free oneself from this race. He stresses the importance of developing financial intelligence as well as a strong sense of discipline in order to break free from this cycle.

The idea of financial intelligence is another compelling concept raised by the book. The author points out that being financially intelligent is one of the keys of achieving financial freedom and acquiring wealth. He lays this out by discussing his rich dad. As compared to his biological father or his poor dad, the rich dad symbolizes financial success and freedom. In the same way, the rich dad represents a small population of the society who are wealthy because of their financial knowledgeable and intelligence. Kiyosaki elaborates on this financial intelligence by explaining that this involves mastering different principles of marketing, accounting, tax law, and business management among many others. But perhaps the most alluring part of the book is that the author delves into the human psyche. More particularly, he explores commonly held traditional views about earning money. For example, he underlines that rich people don’t work for money. This is one of the main lessons of the book. Unlike the poor dad who is an employee, working for money, rich individuals, according to Kiyosaki, make money work for them by investing and putting up businesses. Beyond this Kiyosaki explains that there are two main emotions that often prevents people from creating and getting money – fear and desire. The first emotion involves working for money because there is a fear of losing money or fear of not being able to pay expenses. While it allows people to make money, fear hinders many from evaluating other possible sources of income as well as other investments. In other words, fear paralyzes people and prevents them from fully understanding how money works.

Desire is another element which prevents people from being exploring other ways to make money. Desire in this case, involves the desire to keep buying expensive clothes, the desire to maintain a lifestyle, or a desire to drive expensive cars. This desire to accumulate things is so intense that it forces people to keep working which in turn stops from getting true financial success. The concept of fear and desire, in my perspective, is one of the most thought provoking parts of the book. This is because the term “emotion” is something that seldom appears in financial and business books. To include such concepts in this book is foreign for some critics, but it nonetheless makes the book more relatable to many.

A key concept in this book is developing financial literacy. This section of the book explores the idea of learning how to manage one’s finance. What is good about this part of the book is that Kiyosaki explains the basics of financial literary and present the differences in cash flow per income level. This is the technical aspects of the book. This is because the book presents key terms in the field of finance in order for one to understand vital concepts. This includes income, expenses, assets, and liability among many others. Interestingly, the author presented these terms and concepts in such a way that is easily understandable by a regular person. In one of his examples, he presented the cash flow of those who belong in the lower income bracket to those who are wealthy. Someone from the lower income bracket for instance, generally have a job whose income is less that its expenses; whereas someone who is wealthy often have assets that are greater than the income. This means that those who are wealthy are able to live well because of the returns from their investment. In the same way, poor individuals use his wages only to pay for expenses. As such, in order for the poor to become rich, one must focus on increasing one’s investments or assets rather than simply focusing on increasing income. Simplistic as it may seem, this part of the book provides a very straight forward explanation of cash flow, making it relatively simple for a regular person to understand and therefore practice.

Another vital lesson of Kiyosaki’s book is to mind one’s own business. Similar to the first parts of his book, Kiyosaki delves in once again to traditional belief system about money. More particularly, he targets the belief and practice of increasing income in order to gain wealth. In this portion of the book, the author asserts that in order for one to become rich, it is first essential to develop an attitude to focusing on increasing one’s asset or investment. This means focusing on improving investments instead of simply waiting for a promotion in order to increase wealth. Another crucial point that Kiyosaki underlines is that a person must alternately keep his expenses low as well as reduce liability. Such practice again is very theoretical. But the author communicated such technical concepts to make it more human. Simply put, Kiyosaki rather than preaching financial terms, presented the message in a very simple manner which in turn, allows the reader to understand and, therefore, practice the concept of increasing assets and reducing liabilities.

The fourth part of the book is about the history of taxes and power of corporations. In this portion, Kiyosaki talks about creating a personal corporation. He asserts that the rich are able to avoid numerous personal taxes that those who belong in the lower income bracket face mainly because of corporate exemption. Hence, the author asserts that by filing as a corporation, those who are wealthy are able to mitigate losses. In the same way, the rich are also able to pay their taxes. On the other hand, those who have jobs experience the opposite simply because their taxes are taken out from their incomes even before they can cover their expenses. Kiyosaki explains this concept through an example where in the rich or people with corporation, earn, spend, and then pay taxes. However, those who work for these corporations earn, pay taxes, and then spend. Again, it is clear that Kiyosaki translated such complicated concepts to make it easy for a layman to understand. This is makes the book one of the very easy to comprehend especially for those who have very little technical knowledge about finances, and the world of taxes, money, and cash flow.

Another part of the book that is worthy of mention is the fifth lesson which is the “rich invent money”. In this section of the book, it is admirable how Kiyosaki combines technical concepts of making money and motivational messages. The idea behind this part of the book is that in order for a person to be wealthy, it is crucial to possess financial intelligence as well as confidence and guts. Kiyosaki asserts that one of the main reasons why people hold back is their self-doubt. This means that the process of making money involves some degree of self-confidence and courage. The author asserts that in order to increase one’s investment, one must also be willing to put in their money in places that presents relative risk. It is in this portion that the book crosses the boundaries of being a finance book to being a motivational and self-help piece.

The final lesson of the book is to work to learn. Kiyosaki asserts that many people have the tendency to get caught in a job simply because they need the security that money provides. This means that many people work simply because they have to. The rich on the other hand, use view their job as a learning opportunity. They primarily take in jobs because of the belief that their employment is necessary for them to develop skills that they will need to become successful. Similarly, the author explains that jobs can help a person develop skills such as managing cash flow, managing the system or operation, and managing people. Alternately, Kiyosaki reminds the readers of the factors which prevents people from being successful as well as from learning. For instance, he cited fear of losing money as one of the top reasons why many people fail to take risks. He argues that while this fear is very real, he maintains that handling this fear is what separates the rich from the poor. This is because rich people use failure as an opportunity to learn. Hence, many rich people are not afraid to learn as well as to fail. Laziness is another factor which prevents people from learning. The author asserts that in order for an individual to build his personal wealth one must put in both time and effort.

The lessons in Kiyosaki’s book are educational, motivational, and as mentioned, ideal for beginners or those with very little knowledge about finance and business. There are however, also numbers points in his books that can be quite ambiguous and to some extent misleading.  In the first lesson for example, “The Rich Don’t Work for Money” has two separate meanings. First, it can be understood as the rich using the money for their advantage. On the other hand however, it could simply be read for its literal meaning. And if you read the title closely, it could be understood as the rich not working for the money. This could be quite misleading as it gives the notion that the rich simply sits around and watch their money grow. But the truth if the matter is the rich actualy works for their money and they work quite hard for it. In fact, many billionaires spend hours upon hours working. This means that phrasing the title as such is not only misleading but wrong as well.

Another point of criticism about this book is the lesson about financial literacy. In fact, many finance and business experts deem this part of the book as controversial. One of the causes of controversy is that the chapter redefines the meaning of asset. Many would agree that asset is something that is of value. Examples include your home or car. Kiyosaki however, defines asset as anything that generates income whereas liability is something that has costs. Because of how he defines the term, it would then mean that a house for example, is by Kiyosaki’s definition not an asset but a liability. This is because although it has some form of value, the house, does not general income. In the same way, the house also incurs expenses and costs, thus making it a liability. Again, this could be problematic and ultimately misleading especially for the book’s target readers.

The fourth lesson which is about taxes and the power of corporation is the part which makes the entire book quite ambiguous and at some level just plain wrong. This is because the chapter misrepresents a number of fundamental aspects about taxation. For example, the author talks about his rich dad who is frugal. But in the preceding chapter, Kiyosaki talks about a lifestyle which includes purchasing Porsches and other expensive cars, which is the complete opposite about his message about frugality. In the same, Kiyosaki also mentions about the rich and their tax dodges because of corporations. These are in fact, not tax dodges, but are just tax delays. The author similarly failed to provide essential details about taxes such as liquidation of assets and tax responsibilities that the rich has to fulfill. In this chapter, Kiyosaki presented the idea in such a way that it gives the notion that having a corporation means dodging taxes which is the opposite.

Alternately, Kiyosaki made some contentious points in the fifth lesson of the book which the “Rich Invent Money”. In this portion , the author talks about a deal which have gave him $40,000 in five hours. While this can be true, this again is quite misleading as it makes people or the readers believe that making money is that easy. This is because Kiyosaki failed to provide the readears the reality behind the hard work involved in making money.

While there are numerous parts of the book that I find debatable, perhaps the most disagreeable part is the tone of the book. Although there are countless lessons that are valuable on my perspective, the author presented some of his ideas in a relatively insulting manner. This is very much evident in the lesson six of his book: “Work to Learn – Don’t work for money”. What I find most disagreeable in this part is how the author addresses people who are employed. More particularly, he often refers to them as “hamster” which is very insulting for millions of people who are employed. While to some extent, it is true that having your own business will allow you to become rich as compared to being employed, it must be noted that for some, being employed is a choice. This means that having a job does not make someone financially stupid. Rather these are people who simply choose to be employed rather than having their own corporations or businesses. And their reasons could vary, but it nonetheless does not make it wrong. In the same way, there are also hundreds and even thousands of individuals who have made a difference and a huge impact in a company by simply being a part of it. Jack Welch for example, turned the entire G.E. corporation around by being a part of it.

To sum, the book Rich Dad, Poor Dad both have its positives and negatives. What I like most about this book is that it is motivational and it encourages the readers to reevaluate how they see and handle money. This is somewhat similar to what we have studied in the course. Because at the end of the day, all the jargons and all the terminology will only make sense if they are practiced and used efficiently. On the down side however, the book can be too simplistic. While it is ideal for beginners, the book lacks depth in terms of the details involved in finance. This means that the book has the tendency to oversimplify things which in turn makes it misleading. Alternately, I do not like the tone of the book mainly because it addresses employed individuals in a very insulting manner. Ultimately, I do not recommend this book to someone who wants to gain more knowledge about his personal finances. The book however, can be read for its motivational aspects.

References

Kiyosaki, R.& Sharon L. Rich dad, poor dad. What the Rich teach their kids about money that

the poor and middle class do not!. NY: Warner, 2000