Rich Dad, Poor Dad

I just finished reading "Rich Dad, Poor Dad" by Robert T. Kiyosaki, and it seems like a longwinded (207 pages) way of dishing out a single piece of advice: Buy assets, not liabilities.

The book reads like an autobiography; Kiyosaki writes about how he had two dads, a rich one and a poor one, and how he learned from both. The "poor dad" is his biological father, while the "rich dad" was actually the dad of his best friend, with whom Kiyosaki spent most of his childhood. One day, Kiyosaki asks the rich dad how he got so rich, and the rich dad said he'll explain it, if Kiyosaki is willing to perform some little chores.

The next sequence of events is reminiscent of the scene from The Karate Kid where Daniel is washing cars, painting fences, and other forms of hard labour with seemingly no relation to actually learning Karate. Similar, rich dad has Kiyosaki working at a grocery store for 10 cents an hour at first, and eventually decreases his pay to nothing! When Kiyosaki finally complains about this, rich dad tells him he did this intentionally to frustrate him, and asks what Kiyosaki is going to do next. Kiyosaki suggests demanding a raise, and rich dad says a lot of adults try that, and sometimes they do get the raise, but they're still "poor" in the sense that they're still stuck in the rat race, living from paycheck to paycheck. So Kiyosaki ponders quitting, the rich dad says a lot of his ex-employees do that too, and eventually find a job elsewhere, but that's not the answer either. So what is the answer?

I'll save you the effort of reading the next 100 pages: The problem is that Kiyosaki is working for money, rather than having money work for him. I don't remember whether it was Kiyosaki or Rich Dad who did this (it was "the narrator" who did it, but the narrator switches as the book progresses), but the guy worked at Xerox selling photocopier machines. This was his "profession", but it wasn't his "business". He worked at Xerox to get some money, but instead of living off of that money, he used it to buy real estate, and then rent it off to other people. With the money he made from those rentals, he bought more real estate, and rented it off to more people. It wasn't clear to when or if he ever quit his job at Xerox, but the point was that that job was just a means to an end, and not the "real" source of his income.

So as I mentioned, only one piece of advice stood out to me in this book: buy assets, not liabilities. The problem is that a lot of people have the wrong idea about what is an asset and what is a liability. The book points out that the house that you live in is a liability, even though most people consider their houses to be their "greatest" asset. The book defines an asset as something which generates money for you, while a liability is something which eats away at your money. With this definition in mind, it's more clear that the house you're living in is a liability. You gotta pay property taxes, heating bills, electric bills, water bills, phone bills, etc. The more bigger and more expensive the house, the more you gotta pay. That's a liability. So what's an asset?

Well, if you buy a second house, and instead of living in it, you rent it to someone else at a profit, then that's an asset. It's generating money for you. If you own a business, and the business is generating money for you, that's an asset too. Your car is probably not an asset. Neither is a yatch, or a set of golf clubs, nor jewelry, nor expensive designer clothings or watches.

Other than that, I felt the book was mostly fluff. "Winners aren't afraid of losing.", "Start today, not tomorrow", etc. The book mentions certain terms that made me google for them, and are relatively interesting (e.g. Tax Liens, Incorporate), but the book doesn't actually go into any detail on how to go about buying real estate, for example. The author writes "I can go into any neighborhood and find great deals." but he doesn't actually teach you how to find great deals.

After reading the book, I decided to get into the real estate business. I've looked at various for-sale ads and found a few interesting properties which I will attempt to buy and rent out. I will try to negotiate a mortgage with a low enough monthly payment that I can afford to pay for it, even if I don't actually get any renters (i.e. by skimming off of my paycheck from my dayjob). I'll let you know how it goes over the next few months.

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