My nerdy side loves reading up on stuff about personal finances. As far as I'm concerned, you can never have too much wisdom in that area, so bring it on! I had heard great things about Robert T. Kiyosaki's "Rich Dad, Poor Dad" so it was hovering at the top of my list of non-fiction goodies to digest this year.
The short of it? I think this is a fantastic read. I really like the overall message of the book, which is how to get out of the rat race of the middle class and start thinking like a rich person. I love this concept because that is exactly why my husband and I are busting our butts right now. Sure, we're broke today, but we're not sitting still. We're heading for rich.
Kiyosaki was raised in Hawaii and tells of how he grew up with two dads, his "rich dad" and his "poor dad." His own father was the "poor" one and the father of his best childhood friend was his "rich" dad. Both were great men, but Kiyosaki was challenged with polarizing views on money and success between the two of them. His poor dad was a big believer in education and the importance of getting a good degree and finding a secure job so you can make a good income. (Is any job really all that secure these days?) His rich dad argued that we need more than education. We aren't taught anything about personal finance in school. (Think about it - when did you ever have a class on how to handle money?) So naturally, any financial education a child receives is left up to his parents. Rich dad maintained that finding a "secure job" was not the answer. Learning about money and how to make it work for YOU is the real solution.
Now Kiyosaki's own father wasn't what we think of as "poor." He wasn't necessarily struggling to put food on the table, but he simply thought like a "poor" person thinks... make the donuts, pay the bills, make the donuts, pay the bills. Never getting any traction, like a mouse in a wheel. He was highly educated and well respected, but found himself in this perpetual rat race. "One of the reasons the rich get richer and the poor get poorer, and the middle class struggles in debt is because the subject of money is taught at home, not in school . . . Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors and accountants who earned excellent grades in school may still struggle financially all their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training on the subject of money."
It's often hard for a family with an income of $46,000 (what the average American household makes) to understand how a family making twice that or more struggles living pay check to pay check. "If only we made this much more, than we'd be OK." The truth is, when we make more, we spend more. Dave Ramsey talks about how most Americans take a $300/month raise and immediately turn it into a $400/month car payment. Car payments have become a way of life and are poison to the middle class. They keep the middle class... in the middle class. And that's exactly why the hub and I don't play that game anymore. So it's not all that difficult to imagine how a high income earning doctor or lawyer can get caught up in the race. Make more money, get more stuff. Make MORE money, get bigger better stuff. And on and on...
So obviously, book smarts and lots of letters after your last name mean nothing when it comes to handling money wisely. Hello, I'm a CPA for crying out loud. I was well educated on accounting for money. I learned how to account for different transactions and how they are presented on financial statements and recognized on tax returns. But never in any of my undergraduate or graduate classes did I learn anything about personal finance. Or even wise financial decision-making in business, for that matter. I simply learned how to properly present what's already there. So what we're ultimately left with is what we learned from our own parents. Even if your parents said very little on the subject, you learned a great deal just from watching how they handle money.
My parents were (and still are) very responsible with money. As far as I could tell, they were a good hybrid of savers and spenders. Definitely not hoarders and definitely not over-spenders. And my Dad tried to teach me the importance of saving for retirement. I say *tried* because while I totally understood and agreed with the concept, it wasn't something I was able to get all that excited about at the time. And though I like to think of myself back then (in my teenage years) as being well grounded and self-aware, I know that I, like many young adults these days, felt a sense of entitlement when it came to having stuff. I wasn't a spoiled brat, but I do think I somehow developed this I-deserve-this mentality. A little materialistic? Yeah, probably. My parents were great examples, and I had a few pages out of the manual on being responsible, but I was lacking the motivation to win (not to mention the real definition of winning with money) and the self-discipline to say no. And thus began my early adulthood and early years in marriage... on the quest for stuff (because the accumulation of stuff means you're winning, right?) and continually trying to out-earn our stupidity.
Thankfully, there is a movement to get sound financial education in schools, but much like sex education, parents are ultimately responsible for teaching their children. My gosh, if you teach your kids nothing else, please teach them about money and sex! No two things are more spiritually connected or potentially detrimental. Teaching our (future) kids about money is something the hub and I are SO excited about. We've got lots of great ideas and that's another post for another day, but yes it's something we consider to be extremely important. The fact is, however, most people grow up simply with the "get a good education so you can get a good job" mentality. And that's just not enough. They fall it to the rat race with no hope of escaping.
So what is the "rat race?" Kiyosaki explains that the poor and middle class work for money. And it's fear that keeps most of them working at their jobs - fear of not being able to pay bills, fear of losing their jobs, fear of not having enough. So we therefore become slaves to our money. Slaves to our employers. Along with fear, greed steps in. "Once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern is then set," taught Kiyosaki's rich dad. "Offer them more money, and they continue the cycle by also increasing their spending. This is what I call the Rat Race."
Rich dad went on to explain that the "rich" have a different worldview. They make money work for them. The book goes into a lot of detail about how the rich focus on money-making assets, having a balance sheet view. Whereas the poor are always focused on the income statement - money going in and money going out. Now, I'm an accountant so all this balance sheet and income statement talk made total sense to me. I don't know how easy it would be to grasp if you don't stare at financial statements all day like I do! But I think it's written in a way that anyone could understand the key points here. One point in particular is that the poor tend to buy liabilities that they think are assets... like cars. That's not to say you shouldn't buy a car! But don't fool yourself into thinking you're investing in an asset. And rich people of course buy cars. But they understand that "stuff" is just stuff. They don't immediately run to buy more and more stuff as their money grows. They understand and practice the concept of delayed gratification. This is a huge distinction between the rich and the poor. Kiyosaki even argues that your own house is not ultimately an asset. True assets earn you money. Your house doesn't earn you money, it costs you money. Even if you own it free and clear, it still costs you. You're not making any money off of it. No, you're continually repairing it and improving it.
The book goes on detailing how differently the rich see things than most of us do. As I mentioned, the rich have a "balance sheet" mentality instead of focusing on income and expenses. The rich pay themselves first. They have very little or no debt. And they understand the importance of giving. Kiyosaki adds, "My rich dad gave lots of money away. . . He knew that to receive money, you had to give money. Giving money is the secret to most great wealthy families." None of this rich-people-thinking was necessarily new information for me (since Dave Ramsey has been drilling it into my head for the last couple of years), but I really loved the author's approach to this concept. At the end of the day, winning with money is largely about behavior rather than know-how. You have to change the way you think.
Where the book leaves me going, "Huh?!" is when Kiyosaki goes into detail on how he personally invests and finds opportunities. He is a huge risk taker, which has often brought about great returns for him. But he's also admittedly gone broke over and over again. OK, I only want to go broke once (been there), figure out what the hell I did wrong (done that) and then never do that again. I don't buy into the idea of making high risk investments and leveraging debt to make quick returns. I'm a crockpot, not a microwave. Sure, I may never see some of the huge payoffs that a big risk-taker sees, but I will avoid the heartache when an investment turns sour. And hell if I'm putting my family's security at risk in an effort to make a quick buck. Building and sustaining wealth takes time. And we certainly won't be using debt as a "tool" to build wealth. So on his investment strategies, I have to say, "not for me, Mr. Kiyosaki."
Investing differences aside, I think the overall premise of the book is excellent. If nothing else, it'll challenge you to think about money in a completely different way and really brings light to the fact that NO ONE is teaching our kids about money. It's a very entertaining and quick read. Yes, there's a good bit of financial jargon in there, but I don't think it's anything the average reader couldn't grasp. Grab this book and get out of the rat race!
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January in Retrospect
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