Rich Dad, Poor Dad became a phenomenon based largely on its simple allegorical concept: that the author had two dads, one rich and one poor, who gave him conflicting advice about how to achieve success.  The poor dad advised him to stay in school, study hard, get a good job, buy a house, and save conservatively to a moderate, safe retirement.  The rich dad advised him that the key to success was not in getting a job working for someone else, but to work for yourself and strive for financial independence.

The book’s been a huge success, probably because of its provocative title and message.  Certainly, it’s success doesn’t come from the nuts and bolts financial advice that Kiyosaki gives, since Kiyosaki does a better job of explaining his philosophy than illustrating how to put those philosophies to work for you.  For example, the thrust of his book is that you want to work for yourself, building assets that throw off positive cashflow to the point that your “passive income” covers your expenses.  That is, say, if you own an apartment building that throws off $100,000 of cash every year, and your personal expenses are under $100,000, then your passive income (assuming you don’t work full time maintaining the building) pays your expenses, giving you the ideal of financial freedom.  That’s essentially the point.  Sadly, how you get to the point in your life when you can buy an apartment building throwing off $100,000 of cash each year goes unexplained.

Lack of specifics notwithstanding, and putting aside some of the controversy surrounding whether Kiyosaki is basically a charlatan who made up his “rich dad” and made his money in multi-level marketing scams, the book provides some fundamental advice that’s at least worth repeating:

• Pay yourself first.  This is a concept that comes from any number of financial planning books (all the way back to the Richest Man in Babylon), but it’s a worthwhile reiteration: always put a portion of your income into savings before you pay your bills, to give you the discipline to save.  If you pay yourself first, and don’t have enough money to pay your bills, you’ll either cut your expenses or you’ll find some way to scrape together more money.  Never shortchange your long-term future, which relies upon regular savings.
• Separate your assets from your liabilities.  One of the more provocative, unconventional concepts of the book is that your personal residence is not an asset, it’s a liability.  Kiyosaki takes a narrow view of an asset, saying that an asset is something that puts money in your pocket, rather than taking money out.  A personal residence, according to Kiyosaki, is a liability, since it costs you money every month.  That’s an interesting concept, challenging the conventional wisdom that “your house is your greatest investment.”  Obviously, the point of the conventional wisdom is that you have to live somewhere, so you’re better off living someplace where your monthly payments build equity for you rather than your landlord (indeed, Kiyosaki’s fundamental tool for building wealth is to buy investment property).  But Kiyosaki makes a very good point that too many people sink too much of their money into their primary residence, when it might be better invested.
• Invest instead of save. Kiyosaki takes a somewhat unconventional view of savings versus investment.  Essentially, the point would be that if you have, say, $10,000, you can do one of three things with it: (1) spend it on “doodads” like flat screen televisions that will depreciate in value, which is a waste of money in his eyes, (2) save it someplace where you can get a conventional rate of return, which is a waste of an opportunity, or (3) invest it in a business.  His orientation is to invest in business opportunities (or real estate) that will throw off positive cashflow to get you to the ideal of your passive income overcoming your expenses.  So if you want a $40,000 car, he would counsel to take the $10,000 you have to spend and invest it in a business that will throw off enough cash to cover your monthly payments on the car.  Thus, you’ll still have the $10,000, but you’ll also have the car.  That might seem oversimplified, but so is the book.

The bottom line on Rich Dad is that it understates the element of risk in investing, making it seem as if putting money into small businesses or investment real estate is a no-brainer way to make double-digit returns.  Most people following his advice without proper training will probably go broke, with just enough people muddling through toward success for him to use as “success stories” in follow ups or on his website.  I liked some of the philosophies in Rich Dad, and the premise is brilliant, but at its core the book is empty of practical advice.

Takeaway

Rich Dad Poor Dad is a great book.  Not “great” in that it’s a good read, because it’s not.  And not “great” in that the author actually provides any help in showing you how to become successful, wealthy, happy, or whatever.  But “great” in the sense that it evokes a simple aspirational message that we should all be focusing on our financial futures by creating investments and businesses that will generate sufficient income to cover our expenses.  This is most easily done, of course, with real estate, which is why real estate is always going to be such an attractive investment vehicle for everyday people.   The larger message should resonate with every real estate agent: if you want to build wealth, invest and build your business.

I can’t really recommend Rich Dad Poor Dad because I know too much about how Kiyosaki has tried to take the simple concept from the book and turn it into one of those financial coaching businesses that’s more exploitative than enriching.  And there’s certainly a lot of smoke about whether he has made up most of the story.  All that said, though, there’s a powerful and simple message in the book, which makes it a reasonable read if you’re willing to go elsewhere (and to more reliable sources) for your specifics.