Featured

"Rich Dad Poor Dad" is Overrated



Published
One of the most overrated books in Personal finance is Rich Dad Poor Dad by Robert Kiyosaki. A simple search on google shows his face. If you look at the definition of "overrated", it means something is valued too highly. That does not mean that the product sucks. Instead of a 9.5, one could rate it 7, but ratings are opinions. Sharing this post is an opinion. An opinion is a view that you could consider but not accept. I am giving my opinion based on a layperson in finance. I think being not an intellectual is highly advantageous for me.

Here's a brief background of Robert Kiyosaki. He is an entrepreneur who made his fortune from the Rich Dad Poor Dad franchise. Currently, his estimated net worth is 80 million. From his interviews, he is never a fan of the school system. Strangely, one of his videos stated that jobs are for losers. I can never understand why will someone offer an inaccurate view of the working class. The word "loser" refers to someone who is a failure. How is playing your part in the economy a disaster? This logic is flawed. If everyone succeeds in business, nobody works for anyone.

One of the central points in the book discusses the stark distinction between the two dads. Robert's father plays the role of the poor dad. While the father of his best friend assumes the role of a rich dad. The book starts with Robert Kiyosaki working for Rich dad with as little as 10 cents an hour.

Why?

The Rich don't Work for money

Defintion.

To let money work for you, you need a lot of money or very outstanding ideas that help you to grow a small amount to a fortune. Let me repeat, you need huge capital or impressive ideas with good foresight and execution.

Even if it's true that the rich use money to work for them, this does not mean they don't work for money. It's a different way of making money except the decision is divorced from time. Results are uncertain compared to an hourly wage.

If you start a bubble tea stall with your capital, that is a financial risk. You need to find the right supplier, negotiate rental costs, develop a unique selling proposition, hire secondary girls to tend your stall, which requires good decision making and time. Time is still required.

The time to put this together is a cost. An opportunity cost, that will never return. Time is more expensive than money. An entrepreneur is taking a financial and time risk to earn a fortune. An employee takes a steady paycheck.

Lesson Two of the book starts the title with, "Why Teach Financial literacy?"

This chapter explains the importance of buying assets instead of accumulating liability.

So what is an asset or liability in this context?

An asset is something you buy that puts money in your pocket. A liability takes out money from your pocket. By this point, some of you will tell me what the fuck Dean, this is such a simple concept. If you are financially smarter than me, you must already know this concept. For the sake of clarity, what does this exactly mean? Is this some voodoo magic that is only known to the rich?

Let me share a few simple and easy examples.

When you spend money on things that have no return on your money, we can call it a liability in this context. However, what has returned on other factors such as happiness or physical pleasure is debatable. For this context, I am talking about cash. Yusof Issak. George Washinton.

Humans need food, water, and oxygen to survive.

Technically when we spend on food or water to survive, we are not getting a return on our money. Your return on investment is poop in the toilet. A plate of chicken rice from the coffee shop and a plate of steak from a fine dining restaurant, fulfil both functions of our hunger. However, regardless of a $3 meal or $100 meal, you don't get back your money. Buying a cup of bubble tea fulfils the same role as quenching your thirst with a glass of water. Your honey milk tea does not make you richer.

However, when you spend money on stocks, bonds, a business, cryptocurrency, NFT, or property in a strategic manner. There is a potential return on your money. Thus, these are a form of assets. In essence, the book tells you to stop spending on stupid shit when you get your pay and invest most of it.



A crisis can wipe your gains in your portfolio if you do not have the conviction to hold. In 1998, Singapore experienced a crash in property prices during the Asian Financial crisis. If you invested in Lehman Brothers, you might have lost your money in 2007 during the subprime mortgage crisis. Bitcoin crashed about 65% of its value in 2018. Picking the wrong investments as a result of ignorance is worse than putting your money in a savings plan.
Category
Job
Be the first to comment