A while ago, I said that I would review Robert Kiyosaki’s book Rich Dad, Poor Dad. I’ve been a little snowed under recently, so this book review is coming out later than I’d have liked. Never mind.
It’s difficult to exactly describe this book. It’s subitled What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not! It’s portrayed as being loosely anecdotal, with Kiyosaki and his friend Mike being educated in how to be rich by Mike’s father – the Rich Dad of the book’s title (Kiyosaki’s own father is Poor Dad). Ostensibly Rich Dad is grooming Mike to take over his Hawaiian business empire, and Kiyosaki goes along for the ride.
Rich Dad’s advice is to concentrate on ‘minding your own business’. Buy assets that generate income, learn how to run a business, incorporate and you will be rich. On top of that Kiyosaki’s advice is to invest in real estate (don’t forget to use some weird American tax exchange thing-y!), don’t bother to diversify, go to seminars, learn about sales, and don’t be afraid of failure.
Lots of things about this book annoyed me. Some of the advice is dangerous, including the dismissal of diversification, the reliance on real estate investing, and the flexible approach to insider trading, and tax law.
Despite saying that you shouldn’t be reliant on tax laws to make money, many of the suggestions are reliant on US tax laws which becomes even more obvious when you live in a different tax system. Kiyosaki overstates the benefits of incorporation for sheltering your income from tax, saying that it’s the way to protect income from taxation by deducting expenses before paying tax.
If you look on plonkee money, you can probably guess that I make money from advertising. I’m not incorporated (the US equivalent of registering as a limited company) but self-employed, and I can still deduct legitimate expenses (like web-hosting, or book purchases for reviews) before tax. There are benefits to incorporating, but they are mostly not tax related.
Another problem I have is that Kiyosaki’s strategies are all risky. This risk isn’t mentioned explicitly, is rarely mentioned implicitly, and he belittles people who want to go the slow and steady route. Whilst, in real life, you may indeed want to go for a high risk strategy, you should never do so without understanding what is involved and what you stand to lose, as well as gain.
The problems I have with the book that I’ve mentioned above mean that I would not give this book to a personal finance novice. I’d be afraid that they would unwittingly break the law, or waste a good deal of money chasing after Kiyosaki’s ideas, buying into deals that are too good to be true.
I would not give this book to someone interested in personal finance, because it doesn’t say anything. In fact that’s the reason that I dislike this book the most. Really, and truly, Kiyosaki spends the entire 200 pages exaggerating, skimming over details, and advertising his own products. There are no actionable points, but you are left with the impression that if you just bought another Kiyosaki book, that would hold the key to how to be as rich as he is. That’s a great sales tactic, but I bet it’s one that he repeats over and over.
Do not bother to buy this book. Fortunately, I won my copy and didn’t pay a penny for it. I’m at least the third owner of this book. If anyone else would like to be the fourth,
I’m giving it away to the first person that contacts me with their postal address (put rich dad, poor dad in the subject line). Rob Lewis @ moneywatch.co.uk has claimed the book, you’ll have to get your own copy if you want to read it. Maybe he’ll share what he thinks of it?