Rich Dad's Prophecy?

[KaneKungFu123]

I havent read the book. Is it worth it? How realistic are his claims?

[Mr_Gordon]

Review

[Falang]

Rich Dad's Prophecy if I'm not mistaken is one of his branded books written by somebody else right? Or are you referring to Rich Dad Poor Dad?

I haven't read many of the branded books but I own a few and they look solid. Rich Dad Poor Dad is a book that definately changed my life and has given me a solid head start on many of my peers in terms of financial decision making.

That said, if you already have a solid mind for finance, investing and saving...some of it may seem like reading an intro to Hold em Book or watching WPT when they teach you what the flop and turn are. For me, I didn't get that stuff growing up. A lot of it was like a huge flashing neon sign to me that most of what I had learned was crap, and I needed to take a serious look at my goals and specifically the methods by which I was going to acheive them.

He talks a lot about Real Estate, I think the current US market is horrible for investing in it so I haven't had a chance to take him up on his advice on that much. But the stuff about the cashflow quadrants and having assets and not liabilities and living below your means and acheiving financial independence through passive income is pure gold.

[DesertCat]

John Reed's review/rebuttal has the following table that summarizes most of the problems with Rich Dad Poor Dad. I put the Kiyosaki assertions in quotes, followed by Reeds rebuttals.

"The rich get richer." Sometimes, they get poorer.

"It’s not how much money you make, it’s how much money you keep." The more you make, the more you keep.

"By working harder, you simply increase the amount of taxes taken by the government. " Working harder increases both your before-tax income and your after-tax income, as well your tax liability. What Kiyosaki says would only be true if the tax rate were 100%, which it never is.

"An intelligent person hires people who are more intelligent than they are. " As a general rule, people who are smarter than you will not apply to work for you until you have reached a rather high level of success.

On 8/21/00, the comic strip “Dilbert” made fun of this old platitude by having it uttered by the pointy-haired boss. His subordinates then gleefully pointed out that each boss in the company must therefore be dumber than his subordinates and that the CEO must be the dumbest person in the corporation.

"Most people work all their lives paying for a home they will never own." With each payment, their equity increases. Many people pay off their mortgage in full before they die. Almost all thoroughly enjoy their home both during and after the mortgage.

"Most people, working for a paycheck, are making the owner, or the shareholders richer." Irrelevant. You should choose what you do only according to how it relates to your goals. You should not resent others benefiting from your efforts. Indeed, you will prosper most when you help others achieve their goals.

"You work for the bank. After taxes your next largest expense is usually your mortgage and credit-card debt."
Irrelevant. You should use mortgage and credit card financing whenever they will help you achieve your goals. Resenting bank profits is childish.

"The rich do not play by the same set of rules." Yes, they do. This is sour grapes less successful people use to rationalize their inability to succeed. They lack the character to simply admit that they got beat fair and square in the economic aspects of the game of life.

"It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and middle class." None of my rich friends make any use of corporations. I became a millionaire in 1983 and never used a corporation. Corporations have both advantages and disadvantages. Most real estate investors do not use corporations. Note investors use IRAs and such. Kiyosaki claims to be mainly a real-estate investor. See my discussion below on corporation advantages and disadvantages.

"The reason I minimize my income is because I don’t want to pay it to the government. " Minimizing one’s income is idiotic. You are always better off with more income. His advice would only make sense if the tax rate were 100%.

"You should have a corporation and a board of directors. " One of my graduate-business-school professors called this, “Managing the company from the fiftieth floor when you only have a one-story building.” Having an outside board of directors when you are an individual real-estate investor, with or without a corporation, is a silly affectation.

Corporations are costly, time-consuming, and complicated and have many disadvantages like preventing you from employing your minor children and deducting the wages without having to pay social security, withholding and so forth. Corporations cannot escape those taxes or paperwork on minor employees. In some states, the owner of an incorporated company cannot represent himself in small claims court and must hire an attorney for every little legal matter.

"I love it when my real estate broker or stockbroker makes a lot of money. Because it usually means I made a lot of money." It means no such thing. Brokers profit strictly from transactions, regardless of whether they are also ultimately profitable for the clients.

"I only play with money I can afford to lose." A loss is a loss. All losses make you worse off. There is no line which separates losses that matter from those that do not. You should not invest in something unless you have a reasonable degree of confidence that you will not lose. There are several books, like Innumeracy and Why Smart People Make Big Money Mistakes, that condemn this kind of thinking.

"Action always beats inaction." Sometimes inaction is the best course, like when you are thinking about selling real estate or a stock that subsequently goes up.

[Sniper]

Cat, and your point is?

[chisness]

KKF,

Richest Man in Babylon is RD PD without the BS

Edit: You don't care about RD PD you care about diff book so nevermind, but Babylon is still good

[DesertCat]

Kiyosaki says his “poor dad” frequently said, “I can’t afford it,” while his “rich dad” said, “How can I afford it?” There’s another one of those Jesse Jacksonisms. I agree that a knee jerk “I can’t afford it” is a bad habit. I also agree that asking, “how can I afford it?” is a good habit. However, this little yin-and-yang platitude leaves off the question of whether the expenditure represents good value for the money? Kiyosaki buys extravagant things like a Mercedes and a Porsche and a Rolex watch and seems to regard the “How can I afford it?” question as the only appropriate response to any conspicuous-consumption impulse.

This puts him at odds with the behavior pattern depicted in the book The Millionaire Next Door. That book, which is based on a study of many real millionaires, found that actual millionaires generally buy used American cars. “How do you think a man like me got to be a man like me?” Think about it. One of the keys to success in business is holding your costs down and getting good value for every dollar spent. How could the same person be in the habit of spending money on extravagant items for which a large show-off premium must be paid?

The authors of The Millionaire Next Door found conspicuous consumption was typically a sign of a non-millionaire who was trying to impersonate a millionaire. Ostentation is item number one in my real estate B.S. artist detection check list. The fact that Kiyosaki goes out of his way to talk about his Porsche; his wife’s Mercedes; travel to Peru, Norway, Malaysia, and the Philippines; his “expensive attorneys, accountants, real estate brokers and stockbrokers,” and his $400 titanium driver, makes me wonder whether he is really a financial success or a walking (driving?) Potemkin Village.

Kiyosaki likes Texans. They have a saying: “All hat and no cattle.” Kiyosaki has a big “hat” (showy displays of wealth) and he talks about it a lot.

The millionaire real-estate investors I know generally try to do their own legal and accounting work. They often buy through agents, but try to sell without agents. Kiyosaki is the first real-estate investor I ever heard of who was eager to employ expensive accountants, attorneys, and to use brokers always.

[DesertCat]

"I always make offers with escape clauses. In real estate, I make an offer with the words “subject to the approval of business partner.” Most people do not know the partner is my cat. "

Competent real-estate agents and sellers would strike such a clause. They would either substitute an early deadline for removing all such contingencies, or they would simply say “Come back when you are ready to make a firm offer.” If an investor truly ever pulled this stunt, and it was discovered that his partner was his cat, he would be shunned by everyone in his local market from then on. This is a childish, fraudulent clause. If an investor ever invoked this clause in a lawsuit and admitted his “business partner” was his cat, the judge would not only find against the guy who used it, he would chew him out and might impose punitive damages.

[Sniper]

[ QUOTE ]
The millionaire real-estate investors I know generally try to do their own legal and accounting work. They often buy through agents, but try to sell without agents. Kiyosaki is the first real-estate investor I ever heard of who was eager to employ expensive accountants, attorneys, and to use brokers always.

[/ QUOTE ]

O'RLY?... Trump?

[DesertCat]

[ QUOTE ]
[ QUOTE ]
The millionaire real-estate investors I know generally try to do their own legal and accounting work. They often buy through agents, but try to sell without agents. Kiyosaki is the first real-estate investor I ever heard of who was eager to employ expensive accountants, attorneys, and to use brokers always.

[/ QUOTE ]

O'RLY?... Trump?

[/ QUOTE ]

Reed's talking about successful real estate investors, not successful self promoters who've had mediocre real estate careers.

Seriously though, if you read Reed's comments, investing in hundred million dollar commercial real estate is a much different animal from buying a rental home or small apartment building. And that's what is being talked about here, becoming a millionaire through real estate. I'm sure at the top end of the market Zell and Trump have many lawyers and accountants, but I doubt they are paying brokers 6%.