RDPD compares the finances and life outcomes of "Rich Dad" who was allegedly the father of one of the author's friends and "Poor Dad" who was the author's own father. Poor Dad worked for the school board, worked his way up into a political-level position, ran for a state-level political position, lost the race, and found himself blackballed from all political and educational positions. In his financial life, Poor Dad worked primarily for a salary. Poor Dad did not do much investing or work on the side and generally had the attitude that his salary would hold him over until he was entitled to a pension and that his pension would last him the rest of his life. Poor Dad's main "investment" was the house that he lived in.
Conversely, Rich Dad was an entrepreneur who was involved in many real estate deals and seemed to be starting up companies left and right - including house cleaning companies and import/export companies. Not necessarily anything big at first, but as his wealth grew he began to get into real estate development and hotels.
Rich Dad had a much different view of his money from Poor Dad. Poor Dad primarily viewed money as something to be spent - sure he would pay the mortgage, but the rest of the money would go to toys, vacations, and other entertainment. Rich Dad primarily regarded money as something to be invested - not saved, but invested. To Rich Dad, money's purpose was to make more money for him. Money that was spent on toys did not make more money for him. Money that was sitting in a savings account earning 1% was actually losing money because inflation was 3%.
One big difference between RD and PD is in how they view their personal house. To PD, the house is an "investment" because he bought it for a large sum of money and he hoped to sell it for more money later. Conversely, for RD, the house was not an investment - it was a liability. RD reached this conclusion because owning the house as his personal dwelling:
- Does not put any cash in his pocket on a monthly basis
- Costs him cash every month - including taxes, mortgage, insurance, upkeep, utilities, services, etc.
- Really only appreciates at the same rate as inflation - which is inadequate in light of the expenses. (This point is not very well brought out, but I think it squares with the philosophy in later books).
A note about the author - Kiyosaki goes overboard making his points and the book's perspective is not balanced. Further, Kiyosaki's advice can sometimes seem contradictory if taken literally. For example, Kiyosaki states at one point that the only thing that he considers to be an investment is something that puts money in his pocket at regular intervals - and that everything else is a liabillity. However, later he talks with pride about his experience when a friend wanted a parcel of land and was willing to pay X - and Kiyosaki went out and found a somewhat larger piece of land that he bought for X. Kiyosaki split up the land and gave the piece of land of the desired size to his friend at a cost of X. Thus, Kiyosaki ended up with a piece of land at no cost to himself. Now, that's great, but owning a piece of land does not square with Kiyosaki's definition of an "investment" because the land will require him to pay taxes, etc., while not putting money in his pocket monthly.
Kiyosaki is also a heavy proponent of real estate - particularly investment real estate - and makes it appear that great deals are to be found everywhere and anywhere. In this regard, I recognize that Kiyosaki did a lot of investing in Hawaii - it's where he grew up - during the Asian boom - and that Kiyosaki has not been as great a proponent of investment real estate for some time. Real estate prices vary greatly in their volatility. They are quite volatile on the costs, but not very volatile at all in the midwest and south. Many of the huge gains that Kiyosaki seems to suggest are typical are not indicative of the midwest. I can be pretty confident of this pronouncement because I have owned investment real eastate in this area for several years.
Kiyosaki has also attracted a following that seems to reagrd his word as that of god - which is not conducive to a reasonable discussion of Kiyosaki's pros and cons. Also, Kiyosaki seems to be making the majority of his money selling books and offering coaching services rather then investing and real estate. His books often have one or two good points that could be summed up in about 30 pages, but you get the feeling that he wants to sell more books. Additionally, some of his later books are just re-hashes of the first couple.
That being said, RDPD can be of use to lawyers in helping to gain perspetive on their finances. For example, if you really fill out the chart as the author recommends and list all of your monthly liabilities and income, it really gets it in your face. For many lawyers who like to be in the "win" column, this can serve as a wake-up call and a call to action in reducing their liabilities.
Also, by internalizing the thought process of considering any purchase's continuing expenses when determining whether it is an asset or a liability, lawyers can start making better financial decisions. For example, this can help make it clear that:
- That new foreign car is not an "investment".
- Time shares are not an investment
- Your home is not an investment - and a bigger house = greater monthly liability, not greater "investment" return
- You should be investing an assets that produce a positive return for you (at least stocks and bonds) if you ever want to be free of the "rat race" - Kiyosaki's own name for it
That being said, I definitely took RDPD with a grain of salt - Kiyosaki is very opinionated, sometimes contradictory, and sometimes flat-out wrong. However, RDPD did make me think as a young attorney - so maybe it can be helpful to you, too.
Here's a link to a review of RDPD on "The Simple Dollar," one of the best personal finance blogs. Here's a link to Kiyosaki's own website.