Review of Rich Dad’s Guide to Investing: What the Rich Invest In, That the Poor and Middle Class Do Not! By Robert T. Kiyosaki with Sharon L. Lechter, C.P.A.

“Great spirits have often encountered violent opposition from mediocre minds…We all possess both a great spirit and a mediocre mind. The challenge in turning our idea into a million dollar or even billion dollar asset is often the battle between our own great spirits and our own, often mediocre, minds” (181)

This is going to be a very long post. No joke. For the internet skim reader, I have this to say…This book is well worth your time. It’s totally changed my perspective on society, money, and my own financial possibilities. If you have any interest in being rich, secure, or comfortable, you will want to read this book.

I began my search for a book on investing after I attended at talk at George Washington University entitled “Your life, your money.” At this talk, there was a financial adviser, an accountant, and the CEO of a successful online stock game. Basically, they played snippets of the PBS series, “Your life, your money,” which gave financial advice on:

• credit cards (and credit scores)
• debt
• budgeting
• saving for retirement with a Roth IRA, IRA, and 401K plan
• student loans
• banking
• insurance.

Then, these professionals talked about their own experiences with money and how to be financially successful.

Ever since I was little, I have thought that the responsibilities of an adult included owning a car, owning a house, having a job, and having a family. I didn’t realize there was this whole world of investing that I knew nothing about and that I would need to get to know if I wanted to be financially successful. I also realized that this was something that school was not going to teach me. I knew a little bit about benefits, but not much. When these speakers said that I needed to start learning now and that anyone who was not financially intelligent would have many difficulties down the road, I became very scared, because the only thing I knew about money is that I like to have it and I like to spend it. And so, I began my quest to find a book on the subject.

One evening, when it was rainy and cold, I waddled my way down to the Barnes and Noble near the Federal Triangle (I usually go to the Georgetown one), collected a stack of books that had investing in the title, bought a hot cup of coffee, and started skimming through them one by one.

They all seemed pretty similar. I’m sure you can guess which one caught my eye. I started reading and before I knew it, an hour had passed by and I had read about fifty pages. I closed the book and looked at the title. Rich Dad’s Guide to Investing: What the Rich Invest In, That the Poor and Middle Class Do Not! By Robert T. Kiyosaki with Sharon L. Lechter, C.P.A. The title and front cover seemed kind of tacky, like one of those get rich quick books with big block lettering on the front. However, the inside was far from tacky. I decided to give Mr. Kiyosaki a chance to win my heart over. I finished up my coffee, donned my raincoat and umbrella, and went downstairs to purchase the book.

That was a few months ago. Since then, I have read the book twice and taken extensive notes. This post is going to be a combination of what I learned and what I thought of the book. Mr. Kiyosaki offers many insights into the world of investing, the human mind, and life in general. I highly recommend reading this book if you are interested in learning some things about money and the way the world works. I’m going to quote the book a lot, but they will be awesome quotes. Trust me.

This book offers an answer to the age-old question: “How do I become rich?” One of the first answers that Mr. Kiyosaki says is that people must observe what others are doing, and simply do the opposite. Let me explain.

When you are little, you are asked the question, “What do you want to be when you grow up?”

When you are little, your parents enroll you in school out of the hopes that you will get good grades, get into a good college, and get a fine, secure job with benefits and a excellent retirement plan. Right?

Mr. Kiyosaki argues that in this country, and well, in the world, the reason 10% of the people control 90% of the money is not because they are smarter or have more schooling, but that they have a fundamentally different life outlook or financial mindset and a higher financial intelligence.

The concept of going to college to get a good job with benefits is a life outlook that prevents people from entering the world of the rich. It confines them to a middle class or poor life. The entire book is dedicated to explaining how the richest individuals make their money through business, real estate, and investing. The short answer is, by building businesses (and taking them public or using the money generated to acquire assets) and investing.

“The rich don’t work for money…they know how to have money work for them” (34).

This is where Mr. Kiyosaki’s cashflow quadrant comes in. A picture of the quadrant is shown here:

E stands for employee. B stands for big business. I stands for investor. And S stands for small business or self employed (accountants, lawyers, doctors, professional athletes).

The main reason that the rich become richer is that the tax laws are different for each quadrant. If you are going to earn your money in the E quadrant or the S quadrant, you will experience a higher level of tax than if you owned a business or had portfolio or passive income. The richest people build businesses and then have their businesses invest in other assets, like real estate.

“The tax laws are not fair; they are written for the rich and by the rich. If you want to be rich, you need to use the same tax laws the rich use” (8).

Essentially, to be rich, you have to overcome your conditioned way of thinking and change your perception about money.

Now, not everyone wants to be rich. Either way, Mr. Kiyosaki believes that everyone needs a financial plan to be secure, comfortable, or rich. For the first two, he recommends either handing your money over to a professional money manager or investing in mutual funds. If one of those are your goals, this book will give you a good perspective on the world of the rich, but it will not be as much help. The rest of the book details the process of becoming rich and the cost (a high financial intelligence, business skills/experience, and risk). P.S. What’s ironic is Mr. Kiyosaki believes that getting a job is more risky than pursuing real wealth, because you don’t have much control over your job, and you can’t sell it, the way you would be able to sell a business you created.

There are three things that Mr. Kiyosaki focuses on: mindset, investing, and business. In order to be rich, you not only need the technical skills, but you need the mental strength and drive.

Here are some quotes that stood out to me:

“One of the reasons so few people become rich is because they become set in one way of thinking. They think there is only one way to think or do something. While the average investor thinks ‘Play it safe and don’t take risks,’ the rich investor must also think about how to improve skills so he or she can take more risks… Rich dad called this kind of thinking, ‘thinking on both sides of the coin’” (10).

“You cannot teach someone to be a sophisticated investor. But a person can learn to become a sophisticated investor. It’s like learning to ride a bicycle. I cannot teach you to ride a bicycle, but you can learn to ride a bicycle. Learning to ride a bicycle requires risk, trial and error, and proper guidance. The same is true with investing. If you do not want to take risks, then you’re saying you do not want to learn” (26).

“Whatever your reality is about money inside of you is the reality of money outside of you. You cannot change your outside reality until you first change your inside reality about money” (42).

“Most rich kids lose their parents’ money because although they grew up in extreme wealth, they never really learned how to build an engine or fix it after it is broken…They grew up on the rich side of the coin, but they never learned what it takes to get to that side” (43).

Mr. Kiyosaki believes that the most important part of becoming rich is changing your mindset about money. Here are some more quotes that stood out to me.

1. Words“Words form thoughts, thoughts form realities, and realities become life. The primary difference between a rich person and a poor person is the words he or she uses. If you want to change a person’s external reality, you need to first change that person’s internal reality. That is done through first changing, improving, or updating the words he or she uses. If you want to change people’s lives, first change their words. And the good news is, words are free” (64)“If a person leaves school without learning the vocabulary of investing, finance, money, accounting, corporate law, taxation, it is difficult to feel comfortable as an investor” (61)“Words are, in my opinion, the most powerful tools or assets we as humans have, because words affect our brain, and our brains create our reality on the world. The problem many people have is that they leave home and school and never learn or understand the vocabulary associated with money…resulting in a lifetime of financial struggle” (378)Being a writer, I find that concept very interesting. It’s true. Words affect our internal reality. That’s where mood comes from in books and the reason that this book has such a profound impact on my way of thinking.
2. Cooperation instead of competition“When it comes to money, many people often suffer alone and in silence. Chances are, their parents did the same thing. As your plan evolves, you will begin to meet the new members of your team, which will assist you in helping make your financial dreams come true. Members of your financial team may include: financial planner, banker, accountant, lawyer, broker, bookkeeper, insurance agent, and successful mentor” (75-76).“To gain more abundance a person needs more skills and needs to be more creative and cooperative. People who are creative, have good financial and business skills, and are cooperative often have lives of increasing financial abundance” (42).“Business is a team sport…Investing is a team sport…The problem with being in the E and S quadrant is that you play the game as an individual, playing against a team” (257).“A leader’s job is to bring out the best in people, not to be the best person…if you are the smartest person on your business team, your business is in trouble…true leaders are not born leaders. True leaders want to be leaders and are willing to be trained to be leaders, and training means being big enough to take corrective feedback” (266).Quite frankly, I’m a loner. I don’t like cooperating. This will be hard for me to overcome lol.
3. Importance of time“The difference [between being rich, secure, and comfortable] is the price…the price is not measured in money; it is really measured in time. And of the assets of time and money, time is really the more precious asset” (85).“Time is your most important asset. If you are not willing to invest your time, then leave your investment capital with people who are following the investment plan of your choice. Many people dream of getting rich but most will not pay the price of the investment of their time” (118).
4. Mistakes“My real dad came from the world of academics, a world where mistakes are perceived as bad and to be avoided. In the world of education, the more mistakes a person makes, the less intelligent that person is thought to be…my rich dad came from the streets. He had a different view on mistakes. To him, mistakes were opportunities to learn something new, something he did not know before. To him, the more mistakes a person made, the more a person learned” (151).“In school, you’re given the lesson first. On the street, you’re given the mistake first and then it’s up to you to find the lesson, if you ever find it” (153).“In rich dad’s world, he viewed risk, mistakes, and failure as an integral part of human development. So instead of avoiding risk and mistakes, he learned to manage risk and mistakes. His view on mistakes was that a mistake was simply a lesson with emotions attached to it” (156).“Most people are so security conscious that they live their entire lives avoiding striking out just once” (45).“Life is a cruel teacher. It punishes you first, and then gives you the lesson” (76).“School smarts are important, but street smarts make you rich” (157).
5. Money and banking“I think of money as only a medium of exchange. In reality, money by itself has very little value. So as soon as I have money, I want to exchange it for something of value…they turn their cash into trash” (87). (cash into trash meaning things like getting your nails done, an expensive car, etc.)Money is not safe in a bank. Inflation and taxes cut it down and make the interest not worth it.
6. The government is not there to help you. It encourages you to acquire liabilities like a home and taxes you when you acquire assets. Don’t listen to your banker. Your home is not an asset until you turn it into one by selling it. Up until then, it is a liability and the BANK’S asset (due to mortgage payments and accruing interest).
7. Investing“Investing ultimately begins and ends with taking control of yourself” (34).“No one disagrees on the importance of planning. The problem is, very few people actually do it” (63).“They key to staying young is to decide what you want to be when you grow up, and then to keep growing up. Nothing is more tragic than to see people who have sold themselves short on what is possible for their lives” (82).“You wouldn’t ask a great painter to stop painting once he or she was successful, so why should I stop building businesses, investing, and making more money? That is what I do, just as painting is what artists do to keep their spirits young and alive, even though the body ages” (83).“The more you find out what might be possible for this tremendous gift called life, the younger at heart you will remain” (83).
8. FriendsWhom you surround yourself with determines your future.

I was considering including stuff on investing and business, but then I realized it would make more sense just to tell people to read the book if they are interested in that :-P.

This book has given me a different perspective on money and life. It’s really amazing the stark contrast between my parent’s values and this guy’s. My mom is always like “you need to save.” My dad is like “diversify your portfolio.” This guy is basically saying the exact opposite…very, very interesting me thinks.

To be honest, in the middle of this book, I was very doubtful. I thought the guy was an idiot. After I read it all the way through though, he actually makes a lot of sense. I don’t know if I’m going to be an accredited/sophisticated investor or build my own business, but it’s opened up my mind to the possibility. I think I will definitely be active with investing once I have a job, and maybe try to start a business part time. We’ll see. Lol, it’s no secret that I want to be rich and powerful lmao. Also, I like the idea of having people working for me, instead of working for them. I seriously would despise having to work for someone I don’t like. I also want financial freedom through portfolio and passive income, so I don’t have to work if I don’t want to.

It’s kind of a relief to learn that I can be rich or live comfortably even if my paycheck is less than 100,000 dollars a year or even less than 60,000. It just takes a lot of hard work and nomming of financial information. I will definitely be reading Rich Dad Poor Dad (The book Kiyosaki is more famous for) and I just bought…

Quote from end of book:

““In order to create a world of an abundance of money it does require a degree of creativity, a high standard of financial and business literacy, seeking opportunities rather than seeking more security, and to be more cooperative instead of competitive” (399)

Quote from beginning of book:

“That night, I began my mental preparation by making a decision between job security as chosen by my poor dad, or pouring a foundation of real wealth as chosen by my rich dad. That is where the process of investing truly begins and where rich dad’s lesson on investing start. It starts with a very personal decision…a mental choice to be rich, poor, or middle class. It is an important decision, because whichever financial position in life you choose—be it rich, poor, or middle class—everything in your life then changes” (35)

P.S.

Oh, and if you’ve read the book, or just are too lazy to, but want to know more about investing, I took a lot of notes so I don’t have to read the book again, so here they are. Keep in mind, they are mostly quotes, so I aint claiming to be thinkin these ideas yo. Dig?

KTHX,

TK

Another review of the book by: Jaynsteele