RICH DAD POOR DAD -- RICH AND POOR LESSONS PART 1
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I love reading business books. Some of my favorites include Jack Welch, George Perez, Donald Trump, ZigZiglar, Jack Trout, Peter Drucker, Richard Branson, Jim Collins, Thomas Stanley and yes, Robert Kiyosaki.I can say Rich Dad Poor Dad was one of the most influential books I’ve read. It was recommended to me by a friend back in 2000. Followed by the release of several other rich dad books which I also read.
Whether Rich Dad Poor Dad is a true story or a make believe story, there are valuable business principles we can learn and apply.
But wait... let me also warn you of potential pitfalls we need to watch out after reading the book.
For almost 9 years, I have tried to apply the principles in the book. Now I am going to attempt to separate the real rich lessons from the hype-- poor lessons.
#1 Buy Assets for Passive Income --- Rich Lesson.
In the book, Kiyosaki redefined an “asset” as something that puts money in your pocket and a “liability” as something that takes money out of it.
In real world definition, asset is just defined as “something that has value”. For us not to argue merely with terminologies, I will agree and say yes buying something that puts money in your pocket is wise. Call it whatever you like, an “asset” or whatever.
Buying real estate properties for Cash Flow or Passive Income has worked well for me.
You just leave the post-dated checks in your bank and then the cash automatically comes in every month. (except only when it bounces)
It would be an advantage if you have a knack for leasing or renting out properties but If you know a very good real estate agent or broker, then you will be fine.
Owning a blog or a website that puts money in your pocket is a great idea. Owning a patent or a copyright is even better. Collecting interest from cash investments? Who doesn't want these things?
#2 Your house is not an asset --- Poor Lesson.
This is one of the most controversial statements that made the Rich Dad books popular. (and maybe successful) People think its mind boggling. For me this is just hype --- or something to talk about.
Kiyosaki says that your house is a liability and not an asset.
Again, the term “asset” is tweaked or redefined by the author. I certainly agree that my house is not an investment. Not income producing. And yes, there are expenses in order to maintain it. But to say its not an asset is just silly or exaggerated.
I already owned several real estate properties which produced income (redefined as asset) before I lived in my own house. I used to rent a place. But that background or perspective didn't change the fact, that my house is still an asset.
In real world definition, an asset is something useful that has value. It can be used to meet financial obligations when needed.
With this definition, I will have to say that my house is still an asset. If I sell my house today and move out, I will pay around 700% more in rent. Now that’s a liability.
So thinking that your house is not an asset is just inappropriate. Maybe except if you have a luxurious house that you cannot really afford.
Without the hype, maybe what Rich Dad wanted to say was...
- Owning a house that you cannot afford is a liability
- Your house is not an “income-producing” asset (at least while you are living in it and while you are not yet selling it at a profit)
- First, invest or grow your money then buy that dream house
- Don’t treat your home as an investment. (unless if you are planning to make money out of it)
Simpler?
Read part 2 --- click here.
4 comments:
Interesting observation on the asset definition by Robert Kiyosaki. I am a huge fan of this author and I have not looked at this angle yet.
I would say you have shed some light as to the context Robert is telling the story which seems to me just trying to call the readers attention by disassociating familiar words with its known meanings.
Much like Dan Brown did in the Da Vinci Code.
Great post!
@Pinoy Top 10 --- I am a huge fan too =)
........"I would say you have shed some light as to the context Robert is telling the story which seems to me just trying to call the readers attention by disassociating familiar words with its known meanings..."
Yes. That's the best way to describe it!
Thanks for sharing your ideas.
Hi Yeng! Nice blog, I should've visited it earlier. It's now 2 in the morning and I'm hooked! I don't agree with some, if not most, of what R. Kiyosaki has written too - I'm tempted to enumerate them but for now, I'll read on your insights muna :)
Hey Chame! Thanks for visiting.
I think I know how you feel, I am also tempted to enumerate many things I disagree with the Rich Dad books but don't really want to put it all out there all the same time!
Feel free to share to us what you think =)
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