Rich Dad Poor Dad

[vindikation]

I just got "Rich Dad Poor Dad" today at the library. I didn't even really look through it, but the subtitle of the book "What the rich teach their kids about money - that the poor and middle class do not" hit me like a ton of bricks reflecting on my middle class upbringing.

Degen recommended this book and it looks good, anyone else read it?

[chisness]

http://www.johntreed.com/Kiyosaki.html

[JonPKibble]

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http://www.johntreed.com/Kiyosaki.html

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There are a lot of naysayers out there, but I've read this book (as well as a few other Kiyosaki books) and he is a great author with many great points of view. I recommend reading this book and forming your own opinion, rather than judging his material from the opinions of others.

[CD56]

I haven't read this book, but my parents own it and several others like it- "the millionare next door" etc. and i perused them once while i was home

the gist of all of them seems to be the same... money management for people with no common sense. ie:

-pay off your credit cards every month
-car leases are generally -EV
-don't go into debt for things like vacations/christmas/unnecessary items

while i can't blame the publishers of these books for their content, its amazing to me that there are enough idiots out there who have no idea how to manage their money that books like these routinely become best sellers

[JonPKibble]

Never underestimate the power of stupid people in large groups!

[CD56]

[ QUOTE ]
Never underestimate the power of stupid people in large groups!

[/ QUOTE ]

-Red State Moto

[squiffy]

I bought and enjoy reading and re-reading Rich Dad.
GOOD NEWS -- it preaches very basic, common sense investing wisdom, but does it in a very interesting way. It tells a story. Kind of like in the Christian Bible. Jesus wouldn't just teach a lesson. He would tell a parable or story, which illustrated the concepts. Just like you would tell kids a fable, an interesting, easy to remember story, that sticks in your mind, because it involves talking animals.

The info in Rich Dad can be stated in a few sentences. But the power of Rich Dad is that the story really helps you appreciate the lessons being taught.

Buy assets that appreciate, don't spend your money on depreciating assets. Don't just live for the moment. Let your money work for you. Invest in real estate or stocks or IRAs and 401ks. Study accounting and law.

Parables and stories are mainly intended for kids and illiterate peasants back in Jesus's time. Though they are certainly fun for more educated people to read.

It is sad, though, that so many people think that the basic advice in Rich Dad is a revelation. Almost any basic money management book communicates the same concepts. But most other books do it in a dry matter of fact way.

People want to be entertained.

Rich Dad is a book with one-paragraph of information stretched out over 150-200 pages and illustrated with a fun story.

But if that's what it takes to drive the message home. So be it.

[Degen]

i'll reccomend it again

most life changing book i've ever read

[Degen]

[ QUOTE ]
Buy assets that appreciate, don't spend your money on depreciating assets. Don't just live for the moment. Let your money work for you. Invest in real estate or stocks or IRAs and 401ks. Study accounting and law.

[/ QUOTE ]

this is pretty true

tho you forgot to add corporations into this mix...


perhaps the reason the book helped me so much is because prior to reading it i did not see these things at all...like the millionaire next door, this book helped me to grasp the idea of 'living below your means' and that every guy you see driving a BMW is not necessarily rich...and that having nice things and being in debt is way worse than having not so nice things and having massive wealth on paper

these things were not preached to me growing up...the idea of setting up a corporation to avoid paying taxes, or at least significantly reducing my taxes...was not one i knew about


but yes...the book basically says to be cheap, pay yourself first, invest wisely, do not spend your hard earned money on homes and cars, but instead to spend it on assetts that you can then buy homes and cars with

[krishanleong]

What kind of corporation did you set up? Any futher reading suggested for someone who is interested?

Krishan

[JonPKibble]

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It is sad, though, that so many people think that the basic advice in Rich Dad is a revelation. Almost any basic money management book communicates the same concepts. But most other books do it in a dry matter of fact way.

[/ QUOTE ]

That is the beauty of the book, it is written in terms that simpletons can understand. You don't need an MBA to understand the concepts he explains.

Now that you have read Rich Dad, check out his previous book, "If You Want To Be Rich And Happy, Don't Go To School?" The title is actually a bit misleading, he isn't really recommending people don't go to school. It's merely a constructive criticism of our public education system. Definitely worth a read.

[Sniper]

Despite the naysayers, its a good book, that I definately recommend.

Most people are not taught the concepts that he conveys.

[vindikation]

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but yes...the book basically says to be cheap, pay yourself first, invest wisely, do not spend your hard earned money on homes and cars, but instead to spend it on assetts that you can then buy homes and cars with

[/ QUOTE ]

Well holy [censored], that's me to a "T". I'm one cheap bastard with zero debt and around $50,000 saved up which I'm in the process of starting to invest. I can't afford to buy a house in Los Angeles, so I want this money to work for me.

[Degen]

LLC

talk to a good accountant, there is also a lot of stuff available on the web

the moral of the story is that a corporation is not a building with a secretary and file cabinets...it is some papers in a file with your accountant and your lawyer

it is a massive tax shelter if you use it the right way

READ THE BOOK

[Degen]

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but yes...the book basically says to be cheap, pay yourself first, invest wisely, do not spend your hard earned money on homes and cars, but instead to spend it on assetts that you can then buy homes and cars with

[/ QUOTE ]

Well holy [censored], that's me to a "T". I'm one cheap bastard with zero debt and around $50,000 saved up which I'm in the process of starting to invest. I can't afford to buy a house in Los Angeles, so I want this money to work for me.

[/ QUOTE ]

you got the first part down...its taken me a lot of effort, and i still got a loooong way to go, to trim my spending

[Peter666]

It's true. One of the concepts that really sticks out and is so important to understand from this book is that your house is never an investment, especially when you take out a mortgage for it. The banks and lending institutions love to feed this lie to the average Joe.

[wmspringer]

I've read it; I found it quite interesting.

[squiffy]

Again, the info he presents is not new. You can get it from any basic personal finance book. In fact, he actually presents much less info than you would find in a long, boring lecture on personal finance.

But what little he does present, he presents in a very interesting and memorable way, by telling a story. And he spends many pages, emphasizing a few important points. So it's easier to grasp and hits home.

Its kind of like the difference between telling a kid to work hard and save for a rainy day. Or telling a kid a story about the ant and the grasshopper, how the grasshopper spent all day playing around, and the ant was working really hard, so when winter came, the ant had tons of food stored up and the grasshopper froze his behind off and was starving.

It's easier to remember the story. And it has more emotional impact, than if you just tell someone, save your money and invest in stocks and real estate.

There are lots of business books and personal finance books that take this approach. Who Moved my Cheese. The Richest Man in Babylon, etc.

Just realize that it's a more colorful way to convey the same information that you could also get in many other places.

[BradleyT]

I'm pretty sure this book will return more for the $20 I spent on it than any poker book I've ever spent $20 on. I got it over the past weekend and really enjoyed it and have the means to put it to use.

[DesertCat]

[ QUOTE ]
It's true. One of the concepts that really sticks out and is so important to understand from this book is that your house is never an investment, especially when you take out a mortgage for it. The banks and lending institutions love to feed this lie to the average Joe.

[/ QUOTE ]

I don't understand this at all.

Homes over long periods appreciate at 4% a year. Banks will lend you 90% of that for an interest rate that is tax deductible. Essentially your 10% equity will appreciate at 40% per year, a pretty awesome return. If you don't own a home, you have to pay rent.

So how is your home not an investment? I'm not a real estate nut, I understand we are in a bubble now, and that many people overpay for their homes. But how is buying a affordable home and living in it for ten years or more not a great positive investment decision?

[hmkpoker]

It's a good little book. It basically attempts to get the reader thinking with an investor's head, and it does so admirably. If you're not already a successful millionaire, there's valuable content.

[midas]

While I have not read the book but the author may have had this rationale:

1. Rent vs. Buy Analysis - compare the costs of owning an equivalent home to renting. You would be shocked at how much an owner spends on their house that doesn't drive value compared to a renter. Reinvest the savings from renting every year into the stock market. What was the better financial move? I have no idea what the outcome but I'll bet it's closer than you think.

2. Rising tide theory - unless you plan to move from a hot RE market (CA, DC, Boston, NYC) to Kansas, Nebraska, etc. you will never extract the "gain" on your home investment until you're dead. You will just move from one expensive home to the next. I have had older relatives "downsize" from a home to a slightly smaller condo in the same community and basically executed a equal swap.

[Sniper]

[ QUOTE ]
Homes over long periods appreciate at 4% a year. Banks will lend you 90% of that for an interest rate that is tax deductible. Essentially your 10% equity will appreciate at 40% per year, a pretty awesome return. If you don't own a home, you have to pay rent.

[/ QUOTE ]

You neglect the cost of the interest on the loan in your calculation... your real rate of return is pretty low.

RK's premise that your home is a liability and not in asset, is based on cash flow theory... If it gives you income its an asset, while if it gives you expenses its a liability.

[DesertCat]

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You neglect the cost of the interest on the loan in your calculation... your real rate of return is pretty low.

RK's premise that your home is a liability and not in asset, is based on cash flow theory... If it gives you income its an asset, while if it gives you expenses its a liability.

[/ QUOTE ]

Well I agree with much of what you and Midas say here, I think it's a HUGE over-generalization to say homes are NEVER investments.

Specifically, if your cost of renting is equal to your cost of owning, that's a tremendous investment as you are getting appreciation for free. And while there are some areas (as Midas pointed out) that might not appreciate for a time, over long periods almost all property does appreciate.

Clearly all home owners should do the "rent vs. buy" math. And right now, renting may be much better than buying for most people who don't already own. But in most of history, I think buying works out much better.

For example, in my neighborhood are many older folks who bought their homes for between $50k & $100k 25-30 years ago. They probably made a downpayment of between $5k & $20k. Their homes are paid off and worth around $600k. That turned out to be a pretty nice return on a pretty small investment. For most folks, it's the greatest investment they'll ever make.

Do the math. Say you can buy a home for $300k by putting down $30k. If you pay 6% interest, that's $16,400 per year. Assume maintenance plus taxes is equal to tax benefits. Add to it the cost of not investing that $30K (let's say about 6% or $2k a year). Together thats about $18k or $1,500 per month.

If you can rent a similar house for $1,000 a month, it would appear you are losing $6k per year by buying. But that's decieving. At 4% appreciation, your home will appreciate $12,000 in the first year. So in reality, you are making an excess profit of $6k per year by buying instead of renting. And that profit compounds along with the value of your home.

Of course this math doesn't work as well if you aren't planning to live in your home for at least 10 years or so. In the short run your appreciation could be 4% a year, 10% a year, zero or worse. Buying a home knowing you have to move in a few years can be a horrible decision. But over long term ownership, the math is very compelling, so compelling I've always regretted myself not buying a home sooner.

If the author of "Rich Dad Poor Dad" made a blanket statement about homeownership being a poor investment, then it strikes me he's an idiot guilty of some horrible advice. If he actually said, "homeownership can be a poor investment if you don't do the math and make poor decisions" and the book explains how to do the math and make the correct decision, then I'll stand corrected.

[Sniper]

[ QUOTE ]
If the author of "Rich Dad Poor Dad" made a blanket statement about homeownership being a poor investment, then it strikes me he's an idiot guilty of some horrible advice. If he actually said, "homeownership can be a poor investment if you don't do the math and make poor decisions" and the book explains how to do the math and make the correct decision, then I'll stand corrected.

[/ QUOTE ]

Cat,

Have no fear.. he doesn't say you shouldn't buy a home!... just that you should reorient your thinking to understand that its a liability because it adds expenses. (an investment property producing positive cash flow would be an asset)

As a side point, it seems a little silly to me that you would argue with an author when you haven't even read his book (he actually has a whole series of them). I highly recommend that you pick up a copy, at the very least its a quick read and an interesting story /images/graemlins/wink.gif

[DesertCat]

[ QUOTE ]

As a side point, it seems a little silly to me that you would argue with an author when you haven't even read his book (he actually has a whole series of them). I highly recommend that you pick up a copy, at the very least its a quick read and an interesting story /images/graemlins/wink.gif

[/ QUOTE ]

I have a stack of books two feet tall I'm trying to work through. I'll skim his book next visit to the book store and see if he belongs in the pile.

thanks, dc

[BradleyT]

The author says a better route for home ownership would be to build assets first and then use the income they produce to buy the nice house and car.

[DesertCat]

[ QUOTE ]
The author says a better route for home ownership would be to build assets first and then use the income they produce to buy the nice house and car.

[/ QUOTE ]

Since home ownership at a proper (good) price helps you build your net worth (assets) faster, his advice is to stay poorer for a longer period of time? I've got to read this book.

[kiemo]

Only problem I had with this book is he completely ignores any retirement funding.

His entire book was pretty much saying the only investment options worthy of your time are real estate, high risk stocks (which he says 'YOU' should never do, but since he is so smart he makes millions on these high risk stocks all the time) and if you have to tax lien certificates.

But mostly he emphasises getting real estate that returns monthly income. This way you can reinvest the montly income into more real estate. Etc..

[Puss In Boots]

This book is -EV.

[BradleyT]

[ QUOTE ]
[ QUOTE ]
The author says a better route for home ownership would be to build assets first and then use the income they produce to buy the nice house and car.

[/ QUOTE ]

Since home ownership at a proper (good) price helps you build your net worth (assets) faster, his advice is to stay poorer for a longer period of time? I've got to read this book.

[/ QUOTE ]

If I'm living in a $50K dump but investing $100K into an income producing asset (say real estate that brings $500/month into my pocket) how is that worse than living in a $150K house but with no income producing assets?

And how does the $150K house help me build my net worth faster than the first situation?

[Sniper]

Cat,

He's also got a website...
you can start here for more info.
http://www.richdad.com/pages/richdadbasics.asp

[DesertCat]

[ QUOTE ]


If I'm living in a $50K dump but investing $100K into an income producing asset (say real estate that brings $500/month into my pocket) how is that worse than living in a $150K house but with no income producing assets?

And how does the $150K house help me build my net worth faster than the first situation?

[/ QUOTE ]

First, you only have to invest $30k (or less) to live in a $150K house. So you can put the rest in your income producing investment. Now you are diversified, with an income stream combined with long term capital appreciation from your house.

Presumably your "income stream" is from real estate. How is it always a good idea to buy investment real estate, but always a bad idea to invest in the real estate you are going to live in?

And if you are happy living in a $50k dump, then congratulations, you will probably do very well at saving and acumulating wealth. But shouldn't you still own, not rent, that dump, assuming the price is right?

[DesertCat]

[ QUOTE ]
Cat,

He's also got a website...
you can start here for more info.
http://www.richdad.com/pages/richdadbasics.asp

[/ QUOTE ]

Thanks

[ QUOTE ]
Assets vs. Liabilities

Assets - something that puts money into your pocket

Liabilities - something that takes money out of your pocket

Is the home in which you live an asset or a liability?

In Rich Dad's world, your house is a liability. Even if you own the property with no mortgage, you still pay property taxes, utilities, maintenance, etc. Therefore: money is being taken out of your pocket. It is not until you sell that property – at a profit and realize capital gains – that it becomes an asset.

[/ QUOTE ]

This is horrible advice. If you rent, you also pay property taxes, utilities, maintenance, your landlord doesn't pay these out of his pocket, he pays them out of your rent. And your landlord gets to keep all the appreciation. Which is why RDPD recommends being a landlord. But not your own landlord. My head just exploded.

And remember my prior example of my neighbors. Once their home values had grown, they always had the option of a refinance to pull that cash out and invest it elsewhere. You don't have to sell the home to benefit from it's appreciation.


[ QUOTE ]
Accelerator #10 – Hedge Funds
Hedge funds allow me to invest with insurance. They have the benefits offered by mutual funds in that they are “easy,” but without the downside risk. There are many different hedge fund strategies but their primary goal is to reduce volatility and risk while preserving their investors’ capital and delivering positive returns under all market conditions

[/ QUOTE ]

I find this advice also mind numbingly bad, there is down side risk to all investment funds. In the last two months two multi-hundred million dollar hedge funds have blown up and turned out to be frauds. Because of their secrecy, it's difficult to separate truth from fiction with hedge funds. They aren't even supposed to be accessible unless you are an "accredited investor", i.e. million dollar net worth or multi hundred thousand dollar income. Not the typical reader.

His investment plan goes on to recommend private placements, options and IPOs. This is all high risk stuff, Warren Buffett has recommended never buying an IPO because you are buying at the exact moment insiders have chosen as their opportunity to get the highest price for their shares.

I'm sure his book has good advice. There is nothing wrong with the advice to save so you can invest. But so far his advice on how to invest your money looks amateurish at best.

[Sniper]

[ QUOTE ]
I'm sure his book has good advice. There is nothing wrong with the advice to save so you can invest. But so far his advice on how to invest your money looks amateurish at best.

[/ QUOTE ]

The advice is pretty amateurish, nothing thats going to blow YOU away (and probably a bit that YOU will disagree with, because of your knowledge).

But thats kinda the idea behind his books... to get people with little education in financial matters to look at things like an "accredited investor" would. The subtitle of the book is "What the rich teach their kids about money -- that the poor and middle class do not!".

Cat, for $11 on amazon, pick up a copy of the book!

[BradleyT]

I picked up the rich dad poor dad guide to investing. It's pretty much required reading if you read the first book.

It talks about how the rich get to invest in things the poor can't (by law) because the rich are accredited investors (http://www.sec.gov/answers/accred.htm).

[Peter666]

He is not recommending renting versus owning, he is telling you the downside of owning.

Where I live, there are many young couples who just bought expensive houses at the top of a market bubble because the "mortgage rates are low." The banks are making all sorts of commercials saying that one's home is an "investment" as well. Having a $300,000 mortgage that is not producing more than it costs is not an investment. On top of that one must consider the monthly expenses of maintenance, taxes etc. These young people will be hit very hard by reality in a short while, as their low salaries will not match the price of inflation.

I plan to take full advantage of this situation by buying up nice homes at bargain prices within the next few years.