Book Review: Rich Dad Poor Dad

I remember a former colleague of mine who, after reading Rich Dad Poor Dad, quit her low-paying job several years back, and switched career to sales. Last time I heard from someone she owns 3 properties.

This is one of the most popular personal books out there.

In this book, Robert Kiyosaki writes about how growing up, he had the opportunity to have had two dads, his biological father and his friend's father. His biological father was a learned man, has a PhD yet struggled financially. His friend's father didn't finish his education, yet he's financially successful and owns several businesses.

The difference is not at the level of education, Robert argues. The difference lies at the attitude and financial literacy.

Robert advocates prudent spending, and especially for young adults, and start building assets that provide cash flows as soon as possible. This could be in the form of rental properties or stocks or bonds, among others. Avoid bad debt (though he's not as virulent towards debt as Dave Ramsey). He gives an example of how he helped his friend to make money when debt is used carefully and wisely, but only if you know what you're doing.

He also advocates paying yourself first: save and invest away your proportion to build your assets first. Only then pay your bills and taxes. Doing this changes you mentally where you push yourself to a corner and will make sure you will maximize your portfolio building, while also keeping yourself (barely) out of trouble – where you will somehow find a way when you have restrict your spending.

In summary, there are three main ways to earn money:

• earned income
• passive income
• portfolio income

Earned income is the salary that you get from your day job. You will not likely to get rich or be financially free by merely depending on this. Passive income is from rental properties (according to him), and the only way to enable this is through building your assets by saving. Portfolio income is from dividend stocks, bonds or royalties.

The rich become and stay rich because they have their money working for them: their money are generating either passive or portfolio income for them, they pay themselves first, and the government and creditors last.

If you are a salary earner and would like to achieve passive or portfolio income, you need to exercise diligence, discipline and prudence.

He also makes the case that your house is not necessarily an asset, contrarily to what many people believe (like my brother-in-law, who kept on telling me to buy a house since a decade ago. Seems like he's stuck in a mental loop that he couldn't get away from).

It's a great book with very little details and straight to the point. All in all, it is an entertaining book and surely could've been an eye-opener book for me, had I not read other books and blogs before.

Probably I would have quit my shitty job and have gone to do something else that pays me more, albeit a painful one, had I read this book 10 years ago. But now, well, I will never know.