plonkee money an english-er's thoughts on personal finance

April 7, 2008

Kiyosaki’s rich dad, poor dad: a book review

Filed under: reviews — Tags: , , , — plonkee @ 12:02 pm

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?

February 8, 2008

february book review: your money or your life

Filed under: reviews — Tags: , , — plonkee @ 12:00 pm

Second Friday of the month? Must be book review Friday. This month’s choice is the seminal American personal finance book Your Money or Your Life by Joe Dominguez and Vicki Robin.

your money or your lifePretty much every personal finance dude has read Your Money or Your Life. For many people, it’s a life changing book. It promises to transform your relationship with money and achieve financial independence. But how does it shape up? And, given that it’s not easy to find in the UK, is it useful for a non-American audience?

what happens in the book?

The book explains a nine step program to financial freedom. These steps are as follows:

  1. Making Peace with the Past
  2. Being in the Present – Tracking Your Life Energy
  3. Where Is It All Going?
  4. Three Questions That Will Transform Your Life
  5. Making Life Energy Visible
  6. Valuing Your Life Energy – Minimizing Spending
  7. Valuing Your Life Energy – Maximizing Income
  8. Capital and the Crossover Point
  9. Managing Your Finances

Several key concepts are introduced in the book. The most important of these is that money is really life energy – you trade your life in exchange for money. The other is that a fulfilling life is more important than money and that your goal should be to get to the point where you no longer need to work for money (financial independence).

If you join in with the program, you will evaluate where you are financially (the first three steps), whether that’s really what you want (the fourth step), how to get to financial independence (steps five to seven), and finally what it looks like when you reach it (steps eight and nine).

is it any good?

Yes. It’s really a self-help book, and the idea is that if you focus on the bigger picture of really evaluating what you want from life, you will be able to spend less, maybe earn more and generally make better choices. As with many self-help books, it is slightly new age-y in style, I didn’t have a problem with it at all.

Although the basic ideas are common to many personal finance sites, it actually takes them a step further. The book really encourages you to push to get off the treadmill and out of the rat race, rather than just do the same things that you’re already doing, but better.

Your Money or Your Life is slightly dated, the *new* edition that I have is from 1999, but it is relatively unchanged from its original publication in 1992 and a fair amount of it has a very early nineties feeling. This made it seem like it was a little inapplicable to me.

Along with other people, I’m not a fan of its dismissal of inflation – it is argued that you can overcome inflation by simply being more frugal and not succumbing to lifestyle inflation. Whilst these are both excellent practices, I’m not sure that they can hold inflation at bay for more than a few years.

The other main criticism of the book centres around the inflation strategy – they suggest using long term US treasury bonds. Readers of moolanomy will know that I don’t really know much about bonds, but I have discovered that the equivalent in the UK are conventional gilts from the UK Debt Management Office. Conventional wisdom is that bonds are just too conservative to be your entire holding for the long term.

should i buy it?

Probably. Overall, it’s actually a good book, and well worth a read. Certainly if you’re caught in a money or debt trap you should definitely check it out. And if you have any interest in personal finance at all you should at least consider it.

Although it’s an American book, it actually translates really well to the rest of us, so you can’t use that as an excuse.

If you’ve read Your Money or Your Life, let me know what you think in the comments.

January 11, 2008

january book review: the money diet

Filed under: reviews — Tags: , — plonkee @ 12:00 pm

This is a new departure for me, I’ve an avid reader, but I haven’t really given you any book reviews yet. So for 2008, I’m planning to make the second Friday of the month, book review Friday. My first choice is a book that I read over the Christmas break, The Money Diet (apparently cheapest at play.com).

Martin Lewis (as seen on tv :) ), who writes The Money Diet, is a consumer journalist famous for his campaign for people to claim back excessive charges from banks. I read the second edition of the book and I was quite surprised by what I read.

the money diet

I wasn’t quite sure what to expect before I started reading this book. Martin runs the biggest money and finance forum on the web (www.moneysavingexpert.com), and his site is a treasure trove of specific information for Brits on how to cut the cost of, well everything.

One of the advantages of the website is that it is updated regularly with the new best buys on financial products, something that I didn’t think could be replicated well in the book.

what happens in the book?

The book itself is divided into three parts. The first part introduces the ideas of saving money with and without making sacrifices and serves as a guide to Martin’s philosophy of trying to get more, for less.

The second part of the book, is devoted to pages and pages of hints and tips for saving money and essentially summarises the information available on the money saving expert site itself. Some of the tips were new to me (cheaper bulk prescriptions for example), and others are fairly standard (use a comparison website to find the cheapest gas and electricity provider).

One of the things that excels in this section is that it doesn’t assume that you have internet access, points out way to get good deals without using the web where they exist, and highlights areas where you really need to use the internet to get the best deal.

The final part of the book talks practically about debt and credit cards. It details strategies for cutting the cost of debt, getting yourself out of debt, and making money through credit cards.

is it any good?

Overall, the book is an enjoyable read, much like a good blog, the friendly personality of the author shines through and it’s certainly pitched at the average person.

There are two main areas where the book struggles though. The first is in comparison with the website, which has much of the same information on cutting costs, but with specific up to date products. However, what is useful about the book, is that you can go through and address each one in turn. It would be much easier to systematically go through your expenses and cutting them back if you had both the book, and the website to hand.

The second aspect that is less successful is actually due to the writer. Lewis states that he’s always been interested in saving money and has never carried any debt. This is great, but, essentially it means (in contrast to say Dave Ramsey) that he’s long on the mathematics and short on the psychology of debt. I think this means that the book doesn’t stand alone.

should i buy it?

This book is probably most useful to Brits, in fact, I think that it might well be only useful to Brits. In addition, if you are British, you have the internet and you want to save money on almost anything, then you should probably check out the website, rather than buying the book.

On the other hand, for a Brit already trying to get out of debt, this would be a useful source of information. And, if you just prefer to have something physical to hand to consult then it might be worth considering.

If you’ve read this book, let me know what you think in the comments.

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