Rich Dad, Poor Dad

By Slow Dad - December 25, 2016

Many investors and financial independence seekers cite Robert Kiyosaki's Rich Dad, Poor Dad and Cashflow Quadrant books as the start of their journey.
Many real estate investors and people pursuing financial independence cite Robert Kiyosaki's Rich Dad, Poor Dad and Cashflow Quadrant books as being the place their journeys started.

Learn why many "assets" actually cost you money

This series of short videos summarises the core lessons Kiyosaki teaches in his books. They are worth a look, and if you are interested in learning more then pick up a copy of his books.

One of the key lessons from Kiyosaki's books is that for something to be considered an asset it must be capable of generating income for its owner. This meant that an owner-occupied house does not meet the criteria required to be an assets, and is therefore a liability because it actively costs the owner money to retain it.

Kiyosaki also talks about the concepts of "Good Debt" and "Bad Debt".

"Good" debt is borrowings used in pursuit of investment income, where the investment returns exceed the financing costs.

"Bad" debt on the other hand is debt that leaves the borrower financially worse off, for example credit cards and car loans. Again, a mortgage for an owner occupier property would be considered to be a form of "bad debt" according to Kiyosaki's definition.

That idea was more than a little controversial when it first came out, but for many the idea of pursuing income rather than loading up on consumer debt has made a huge difference in their quest towards financial independence.

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  1. Good observation. Skimming Rich Dad, Poor Dad (for free, ahem) at an airport almost 20 years ago was a pivotal moment for me. While I didn't exactly start on a FIRE road the next day I can trace my later FIRE activities back to insights the book gave me.

    The 'assets produce income, liabilities cost money to own' is such an important insight and still not widely appreciated.

    His other big insight was the importance of tax and finding ways (legally) to minimise tax. This is commonly appreciated wisdom, though many people who follow it then blow it all on expensive fees!

  2. Thanks Fire v London. Kiyosaki's view should certainly make folks mortgaging themselves into the next generation think twice before committing to a purchase in an also ran location that lacks the fundamentals like proximity to public transport, school catchments, a decent high street, and so on.

    The sooner people wisen up to the fact that owning their own home isn't a golden ticket to financial security the better we all will be. Until then people will still be buying into those "affordable housing" options on flood plains or former landfills.