Book Review on Rich Dad, Poor Dad

” I have not seen a single rich person who has not lost money,

but I have seen thousands of poor people who have not lost any money”

- Robert T.Kiyosaki.

This book, Rich Dad, Poor Dad is written by Robert T. Kiyosaki along with Sharon L. Lecher. In this book author explain us about money management, which was taught him by his two dads. One biological dad and other one was the father of his friend. His own dad was a highly paid, highly educated government official, but ended up poor (Poor Dad). His best friends dad was not highly educated but started lots of business, bought lots of real estate and invested in stocks (Rich Dad). This book makes you think about the facts about money management and how to invest your hard earned money, so that it will grow and eventually makes you a millionaire. In this book, the author tried to explain us the importance of money management at school level itself. The point he makes is that many people learn to work for money but never learn to have money work for them.

The most significant point in this book is the difference between asset and liability. He explains the difference with the most common example, i.e. house. Many people consider house as an asset, the costs associated with a house such as utility bills, property taxes, insurance and maintenance pull away cash flow. He instead defines an asset as a resource that produces cash. A house actually could be in this category if fully paid for and used as a rental property.

According to the author an asset could be mutual funds or stocks that generate cash flow as well as intellectual property such as books or music, which produce royalties. A business that one owns but doesn’t need to be actively involved in the work would also be an asset by his definition.

The author feels that rich people are rich they buy assets and that generate income, poor people are poor because they accumulate liabilities and expenses.

The author believes that true luxuries are experienced when they are the outward manifestations of intelligent investing and asset building. He cites the example of his wife purchasing a Mercedes Benz because it was the car she liked and worked hard to be able to purchase it.

Important lessons to be learnt

• The rich don’t work for money
• Rich invest in ways the poor and middle class do not
• Earned income, passive income, portfolio income
• The importance of financial literacy
• Minding your own business
• The rich invent money

On the flip side:

• Techniques mentioned in this book works best for those who are in mid 20’s, it might not work for established people.
• He did not explain us about how to get started

I personally feel this is a must read book for everyone who are young, it deals with how to accumulate wealth when you are young and teaches us how financial intelligence can be the most important asset.

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