Book Review: Rich Dad Poor Dad

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I read a lot of financial books.  It’s one of the ways I educated myself, but I’m also very selective in the information that I take in and sometimes not everything I read I take to heart.  One of the more popular financial books that I have read is Rich Dad Poor Dad written by Robert Kiosaki.  Like the Wealthy Barber, the book starts our reading more like a novel, taking us through the story of a boy trying to learn about finance from his friend’s father.  The boy refers to his dad as the poor dad, needing to work hard everyday to make ends meet, where rich dad seems very well off, runs his own businesses and feels less stressed about meeting his daily expenses.

If there is anything worth reading in this book it’s the first 3 chapters because the examples presented in the last few chapters seem too contrived.  What really drives my attention in this book is learning to classify an investment asset versus an investment liability.  If you have ever taken accounting in school or practice that as a profession, the definitions presented in this book will contradict those that you have learned.  If you think your car is an asset just because it has a dollar value attached to it, then you will find it shocking that it is not.  The book does a really good job in explaining why a car would be a liability and not an asset.

For most people, the purchase of their first house is considered the biggest investment, and perhaps the only investment, they will ever make.  You might want to rethink that strategy if you read this book.  The author makes an intriguing argument that owning your home is not an investment, but in fact in liability.  What a shocker!  More precisely, the author makes the distinction of an asset and a liability through the means of simple monthly cash flow diagrams.  Things that are assets have a positive, tangible cash flow; whereas liabilities have a negative, tangible cash flow.

The unfortunate thing about this book is that the latter half starts to turn into a bit of a biography of how the author made his fortune in real estate.  It certainly sounds like an amazing strategy to make money, but nowhere in the book is risk involved.  Certainly it is more of a ploy for the author to promote his other line of business, which is giving seminars on how to make money investing in real estate, but not a single risk factor is outlined in the many strategies that he presents.  

If I had to rate this book, I would give it 3 out of 5.  The language in the book is quite simple and it is easy to read for any beginner into the world of finance.  There are some valid points that the author makes during the first few chapters of the book which I would consider a very good read.  Compared to the Wealthy Barber, I would certainly say the former book is much better read if you are trying to learn more about personal finance.  This book is narrow in scope and does not contain as much variety as the Wealthy Barber.  

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