Rich Dad Poor Dad: A must-read for anyone learning about basic finance
OJAI, Calif. – Jon Mesko and I were barefoot, hiking our way through the hidden gem that is Ojai, Calif., surrounded by yellow flowers, bubbling creeks, mountains jutting into the sky, and we were discussing the differences between liabilities and assets. Seems an odd spot to be discussing finance. I suppose the Rules of Nature would have us talk about any of my three literary and life heroes: Ralph Waldo Emerson, Henry David Thoreau, John Muir (all three would come up in conversation often). Instead, we talked mostly about Robert Kiyosaki, and Rich Dad Poor Dad.
I hadn’t yet read the book, but I’d heard much about it. In January, when I posted on Twitter that I had made a New Year’s Resolution to read at least one book on finance per month, and I asked for recommendations, Rich Dad Poor Dad was the most popular title. I opted for others first: Ramit Sethi’s I Will Teach You To Be Rich, Tony Robbin’s Unshakeable, George Clason’s The Richest Man in Babylon.
I guess it took a more personal touch to finally dive into Rich Dad Poor Dad. Mesko spoke highly of it, and I consider Mesko to be one of the more intelligent people I know, particularly when it comes to finance.
As our good friend Adam Roberts would say: He’s not stupid.
I like to take recommendations from people who are not stupid.
So I bought Rich Dad Poor Dad, overcoming the old trope to never judge a book by its cover. For all the fantastic education within the book, Rich Dad Poor Dad must have one of the all-time worst covers.
That’s the thing about covers, though: They don’t actually teach you anything. What comes after it does. In reading Rich Dad Poor Dad, I probably learned more about finance than the first three books combined. Sethi, Robbins, and Clason espouse similar, and what I think to be wise, financial strategies: Pay yourself first. Invest that payment – no less than 10 percent of what you earn – into something that will grow. Have your money make money for you. It’s a passive strategy that is not likely to lose you any money and, over the long term, barring a collapse of the world, will make you a fair sum.
Compound interest is a beautiful thing.
Kiyosaki mentions that as well, and he encourages it, even mentioning the value of The Richest Man in Bablyon. He also – rightly, I’d assume – claims that while many people want to pay themselves first, few actually do. They pay the bills. Pay for wants and needs. And then pay themselves with whatever is left over.
I don’t know if this is right or accurate. I’m just the messenger here.
Where Kiyosaki excels is the simple profundity of what he’s teaching, such as the difference between an asset and a liability. I thought I knew the difference. I did not. I, like many, for example, believe your house to be an asset. It’s not, according to Kiyosaki, anyway. It’s a liability because it’s taking money out of your pocket, via taxes, mortgage, random fixes, and putting it somewhere else.
If I had to sum up Rich Dad Poor Dad into a single paragraph, it would be this: Learn the difference between an asset – something that adds cash flow – and a liability – something that removes cash flow. Build up your assets. Limit your liabilities. Educate yourself on how to do so by surrounding yourself with experts in those areas.
It feels almost strange to give such a rave review of a book that teaches lessons that, in retrospect, are so very obvious. I’m a bit dumbfounded I didn’t know them earlier. That’s another motif of Kiyosaki’s throughout the book: We’re taught how to earn money; not how to make our money work for us.
Essentially, we have no idea what to do with it.
I have a little better idea now. Thanks to Mesko. Thanks to Kiyosaki.
Thanks to Rich Dad Poor Dad.
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