What You Should Take From Rich Dad Poor Dad

Rich dad, Poor dad, written by Robert Kiyosaki. You know, this is a very popular.

Personal finance book many of you have.

Probably read, is also a lightning rod. People quote it as their inspiration, become financially successful, and other people think it's.

The worst thing that was ever written.

The main criticisms of Rich Dad, Poor dad are, number one, Kiyosaki's probably a liar. There probably never was a rich dad.

The people who've looked into it, I think the whole thing's pretty much made up.

The second criticism is that Rich Dad, Poor dad really doesn't give very much concrete advice at all. It's mostly just a collection of cliches about money. And finally, the criticism is that Kiyosaki is just running a cult of personality. You know, what he's done since the book came out? He's kind of now become known as a perma bear.

You know, he's also always forecasting doom and gloom, which of course gets him quoted in lots of articles and gets his work out there even more. Not surprisingly, he's pretty darn good at marketing.

So here's my advice to you. The criticism is valid.

The criticism is probably fair. But like anything in personal finance, including.

This podcast, take what you find useful and leave the rest. And I think there's some useful stuff in the book. So let's talk a little bit about.

Why the book can be useful for people.

First of all, the book is pretty good at increasing interest in finance.

My mom read Rich Dad, Poor dad, right?

I think I got her to read.

A really short book a few years.

Later called the Coffeehouse Investor, but that's it. She's read two financial books in her entire life, right? And she picked this one up on her own, read it, and sent a summary out to each of her kids, right? That says something, right? I think it's good for people to.

Get interested in finance. I think this book's good at getting people interested in finance.

The second thing you can learn from Kiyosaki is how to market stuff, right?

He's really good at marketing. Look at the tagline on the book.

What the rich teach their kids about money that the poor and middle class do not. That's clickbait, right? That's clickbait. Before there was clickbait. A very impressive turn of phase. Some people with marketing degrees never come.

Up with a line that good in their entire career.

Another key concept in the book is that assets make money. A lot of people think their house is an investment.

It's not. It's. It's a liability, right?

Does your house pay you?

No, not for the most part. I mean, I guess it pays you dividends in the form of saved rent.

And it can appreciate over time, but for the most part, your house costs you money. It's a liability.

You have to insure it, you have.

To maintain it, you have to shovel the driveway, you have to mow the.

Lawn, you have to pay interest on.

It, you have to pay property taxes.

On is not an asset, it's a liability. It's a consumption item.

And it's important to know the difference.

Between an asset, a liability. An asset is something that pays you. Maybe it's a rental property, maybe it's.

A few shares of an exchange traded fund, maybe it's a TIPS bond, right? It's something that pays you. It's not something you have to pay for. Your car is not an investment. You do not invest in jewelry for.

The most part, right?

It's something you pay for, it's not paid paying you.

So that's a key concept that I think a lot of people out there just don't understand.

Your stocks, your bonds, your mutual funds, your investment properties, your small businesses, those are assets. They have a positive expected return. So buy those first, become wealthy first.

And then you can go buy some consumption items, if you like.

Another concept he came up with, and he actually came up with a whole second book all about this concept is, is the cash flow quadrant is what.

He called it and he divided people up into employees.

When you have a job, that's the E quadrant. The self employed. When you own your job, that's the S quadrant. The C quadrant is for corporation where you own a business and others are working for you. And the I quadrant is for investors.

Where money works for you. Now granted, there's some overlap between those things, particularly for lots of doctors.

But as you go along, each quadrant.

Is better than the next when it comes to tax treatment. And for the most part, that's true.

Employees get hosed on taxes, right? You can't deduct anything.

You basically are paying payroll taxes on everything you get.

You can't write off business expenses, that sort of thing. So not too awesome.

You're stuck with whatever your employer offers you for retirement plans as you move.

To the self employed quadrant, right? At least you can get your own retirement plans. You can get a big nice solo 401k.

You can get a personal defined benefit.

Plan, you can write off your business expenses. Your tax treatment is just a little bit better.

You could declare it an S Corp.

And have some of your income be distributions and not pay Medicare tax on it. There's some benefits there.

Being self employed with a corporation, you.

Know, the idea here is you now.

Got other people working for you and you're able to scale your own efforts in that respect. And it's pretty cool when you go on vacation and come back wealthier than when you left. And the way you do that is by having your money and your people working while you're sleeping. All right, the final quadrant of course.

Is the investor quadrant.

Whether you're investing in rental properties and.

You'Re using depreciation to cover the income, or whether you're investing in retirement accounts.

And don't have to pay any taxes on that money as it grows, or whether you're taking advantage of tax loss.

Harvesting and the lower qualified dividend and capital gains rates, you know, there's some.

Nice tax treatment for investors and I think that's a good concept that Kiyosaki taught me.

Another thing he does is encourage you.

To be an entrepreneur. An entrepreneur is not. Entrepreneurism is not for everybody, let's be honest. But when it works, it works really well. You know, carving out a chunk of your earned income, investing in a wise way does lead to financial freedom. It takes a little while, it takes some discipline. It takes a little bit of knowledge to do so. There are other pathways. I think one of the most reliable.

Quick pathways out of medicine is to.

Build a short term rental empire. Although a lot of short term people are moving to midterms these days. But I think that's probably the fastest reliable way to build wealth and be an entrepreneur.

But there are faster ways if you.

Can come up with a, you know, your own company. For example, we have an interview coming up with somebody who developed a software company. This is a doc who developed a software company and very quickly scaled it so now it's worth millions just a.

Few years out of residency.

You know, that sort of entrepreneurship does work.

It's risky, yes, it doesn't always work.

But it can be very, very profitable. And I like that Kiyosaki and rich dad, Poor dad encourages you to do that.

Another key concept in there is avoiding the scarcity mindset. This is the idea that the pie is of a limited size, that it.

Can'T be grown and that you have.

To take your bigger chunk of it from somewhere else.

But that's not really the way it works, right? Truly the world is much more aligned with an abundance mindset.

When you realize the pie can grow.

Everyone can become more wealthy and there.

Are no limits on your income. That's not just being optimistic.

I've run into enough people with the.

Scarcity mindset that I think warnings about.

It are completely appropriate. Right?

I mean, imagine a fire blogger saving 90% of their income for 10 years to hit the retire button and then live another 60 years washing out their Ziploc bags and reusing their paper towels. At a certain point, it's better to just find a little paid work you actually enjoy and work for a few more years. Seth Godin famously said, instead of wondering when your next vacation is, maybe you should set up a life you don't need to escape from. All right, the final lesson that I.

Think is worthwhile from Rich Dad Poor.

Dad is that real estate's a good investment.

Now, that doesn't mean index funds aren't good investments.

It doesn't mean that real estate isn't risky. It doesn't mean that real estate can't be a lot like having a second job. That's all true, but it's still an.

Asset class that I think is worthy of inclusion in a portfolio in some form and in some amount.

So if you're looking for something to.

Add to a stock and bond portfolio, I think the logical next choice is real estate.

Bottom line.

You know, there are very few financial books that I regret reading, right?

Just very few.

I have read a few that I'm like, I can never get that time back. This is not one of them.

There's some good stuff in here.

It's reasonably entertaining. I think there's some good lessons to learn. You're not going to learn much from.

It if it's the 25th financial book.

You'Ve read, but if it's the second or third or fourth, there's probably something useful you're going to get out of it.

Take what you find useful, leave the.

Rest, and find your own way to financial success.

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.