Book Review: Rich Dad, Poor Dad

by Mark on April 22, 2010

Before I read Rich Dad Poor Dad: What the Rich Teach Their Kids About Money-That the Poor and the Middle Class Do Not! by Robert Kiyosaki, I was pretty skeptical. I had seen Kiyosaki briefly on TV, and I was somewhat turned off. However, Rich Dad Poor Dad was such a high-selling book for so long that I finally decided to check it out of the library and see what all the hubbub was about. Although the book has several flaws, I actually liked the book more than I thought I would, and I think it was worth reading.

Rich Dad Poor Dad sparks wildly different opinions among readers. I wasn’t the only person who had very mixed opinions of the book, which can be seen from the other reviews at the end of this post. One thing that jumped out at me was how poorly edited it was. I read extensively, and poor editing tends to irritate me. I read very quickly, and poor editing slows me down. I also didn’t like Kiyosaki’s views of taxation. He suggests setting up a corporation. It’s bizarre that he associates setting up a corporation with building wealth. The double-taxation associated with corporations makes them tax inefficient. Most companies these days are set up as LLC’s in order to provide limited liability and avoid double taxation. The other problem is that he seemingly encourages the use of a business to deduct what otherwise would be personal expenses. I believe in using tax strategies to reduce your taxes within the bounds of the law, but I think he is being very sleazy in trying to get away with deducting things that aren’t really deductible.

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”
– Judge Learned Hand –

The Rich Are Different

Despite the negatives, there are several things that I agreed with. The dominant theme of the book is that rich people think differently from poor people. Throughout the book, Kiyosaki talks about his “poor dad,” who was his real father, and his “rich dad,” who was actually his friend’s father that became a financial mentor to him. He does a respectable job of describing the differences in the way the rich people and poor people think. I think that this point is extremely important. Our thinking is what causes the biggest differences in our lives, because the way we think determines the actions that we take and therefore the results that we get.

The most important concept in the book is the idea that the rich buy assets and avoid liabilities. As Kiyosaki says:

“Rule One. You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an asset and a liability.

Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets.”

He goes on to give definitions of assets and liabilities that he admits are different from the accounting definitions, but I think they are very useful definitions when it comes to building wealth:

“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.

This is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities.”

One example that he talks about is a car. Most people consider a car to be an asset, but he considers it to be a liability because it costs us money. In a sense, I agree with him. Your car won’t build your wealth, so it makes sense not to think of it as an asset. Kiyosaki also makes the controversial claim that your house is not an asset because it doesn’t put money in your pocket. I have mixed feelings about this view. Although a house doesn’t put money in your pocket, you are investing in something with increasing value, so my opinion of owning a house isn’t nearly as negative as Kiyosaki’s. However, I do think that most people overstate a house’s value as an investment. Without rental income, the rate of return on real estate is much lower. According to the OFHEO house price index, houses appreciated at about 4.6% annually from January 1991 through March 2008. According to the Case-Schiller Index from January 1987 through February 2008, houses appreciated about 5.4% per year. Obviously you are giving up some return compared to investing in the stock market as a tradeoff to be able to live in the house. This isn’t necessarily a bad tradeoff, but you should take it into account when making the decision to buy a house.

In any case, Kiyosaki emphasizes buying assets to increase your cash flow, which allows you to buy more assets and increase your cash flow further, creating a virtuous cycle. I agree with this view 100%. Most people are not rich because they simply don’t use their cash flow to buy income-producing assets. They spend virtually all their money on things that don’t leave us any better off financially. It’s no wonder so many people make little or no financial progress from year to year.

Money Won’t Solve Your Problems

Kiyosaki said something else that resonated with me because it agrees with what I believed already:

“More money will often not solve the problem; in fact, it may actually accelerate the problem. Money often makes obvious our tragic human flaws. Money often puts a spotlight on what we do not know. That is why, all too often, a person who comes into a sudden windfall of cash – let’s say an inheritance, a pay raise or lottery winnings – soon returns to the same financial mess, if not worse than the mess they were in before they received the money. Money only accentuates the cash-flow pattern running in your head. If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending.”

We see this happen all the time. The stories of lottery winners, athletes, and celebrities coming into huge sums of money and then declaring bankruptcy only a few years later are all too common. This is why I keep emphasizing the importance of the way you think in building wealth. If you consistently run mental patterns for wealth in your mind, then you will very likely be wealthy. If you don’t seem to be making any progress towards wealth, then you are almost certainly not running mental patterns that lead to wealth.


In my personal opinion, Rich Dad Poor Dad is worth reading. There are some important wealth concepts in the book, and it is an easy read. As with any book, I recommend reading it critically, thinking about the ideas very carefully, and taking from it whatever ideas make sense to you. You can discard the ideas you disagree with. So go to your local library and pick up a copy. I’ll leave you with one final quote from the book:

“As a teacher, I recognized that it was excessive fear and self-doubt that were the greatest detractors of personal genius.”

So true.

Other Reviews of Rich Dad Poor Dad

The Simple Dollar review – “The only reason to buy this book is if you really, really need inspiration and didn’t already find it in Your Money or Your Life. If that’s not true for you, don’t buy this book and don’t waste your time on it.”

The review – “With three books on the bestseller lists, I thought we should give one of Robert T. Kiyosaki’s books a read. Rich Dad Poor Dad was a very irritating book. On the one hand, there was some great information given. On the other hand, there also was some seriously flawed advice given, which could lead to becoming “broke” as Kiyosaki prefers to call it.”

I Will Teach You to Be Rich review – “This book is like the kid you hated in high school, but he let you cheat off his test a couple of times so you kind of like him. I have grudging respect for this book, but every time someone raves about it, I usually just want to punch them in the face.

Rich Dad Poor Dad is an absolute juggernaut of a book–it’s been on the bestseller lists for as long as I remember. I re-read this book yesterday. Man, there are some really great points, like how rich people make money work for them and how everyone else works for money. The first chapter is pure magic – read it.”

Comments on this entry are closed.

Previous post:

Next post: