I’ve been asked a number of times for recommendations for books on personal finances – both for adults and for teens. I’ve read lots of books on different financial theories, behavioral economics, financial management and other topics. I find many of them fascinating but I completely understand that many (or even most) people would find them incredibly dull. But there are some books that really strike me as providing something of value for most people – something that can be useful and possibly even entertaining (or at least not painful) to read. Over a series of posts I’ll give you my take on some of these books.
Robert Kiyosaki’s Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not! was first published in 1997 and has been a best-seller among personal finance books for years. Like other books I’ll review, this book was published over 20 years ago. However, little of what the author describes has changed over the past 20 years.
The author starts by describing how he and a friend went about “making money” early on in his financial education. As an aside – something to think about as you read the book – Apparently toothpaste tubes were made of lead until the 1950s. Think about that. He goes on to talk about his financial education through the years and contrasts how his real father, “Poor Dad”, and a friend’s father, “Rich Dad”, approach money.
He breaks this education down into chapters and lessons. Lessons include “The Rich Don’t Work for Money”, “Mind Your Own Business” and my favorite, “Why Teach Financial Literacy?”. In my opinion, the story is useful. Many of the ideas are presented in dozens of other financial books but here, the story makes it easy to read.
Lesson 1, “The Rich Don’t Work for Money” talks about emotions when it comes to money. It really talks more about emotions when it comes to working and a career and the reasons one chooses to have a job and a career and what other choices they could make.
Lesson 2, “Why Teach Financial Literacy?” is a really interesting chapter. It is certainly one of the chapters that gets people riled up because of some specific ideas that the author has regarding assets and liabilities. However, the overall message, that truly understanding how finances work is critical to your financial well-being, is an idea that I completely support. Schools do not teach financial literacy in depth and the curriculums that they do teach are often designed to simply keep students out of financial trouble. The author explains that truly understanding how finances work is necessary to build wealth.
Lesson 3, “Mind Your Own Business” is the chapter that examines entrepreneurship and business ownership. This is where he makes the distinction between focusing on assets versus focusing on income. He also talks about his side gig before everyone else was talking about side gigs.
Lesson 4, “The History of Taxes and the Power of Corporations” has an interesting metaphor for the story of Robin Hood. This is another area that will rub some people the wrong way. But, given that the single largest category of expenses for most of the people I work with will be taxes, I think it’s worth reading. Even if you don’t agree with how he describes the situation, it is a viewpoint and if you’re open-minded, you can learn from it. If you already share his viewpoint then his advice will resonate with you.
Lesson 5, “The Rich Invent Money” is a chapter which is really devoted to explaining why developing your “Financial IQ” is so important. This builds on financial literacy and how to make your financial knowledge work for you.
Lesson 6, “Work to Learn – Don’t Work for Money” is aimed at teaching readers to continue learning and investing in themselves. Interestingly, he advocates learning broadly rather than deeply in a field or specializing. I think it’s up to you to decide if this is a product of the time when the book was written and if the advice would still apply today.
The remainder of the book is intended to serve as inspiration and motivation to get started on using the author’s ideas in your own financial plan.
This book has been polarizing and it isn’t difficult to see why. The author illustrates the two opposing sides and is clearly trying to make a point – so one of those sides is portrayed as far less than the other. But whether you agree or disagree with what he says, it makes you think about your own approach to money. Perhaps you may shift your beliefs about building wealth, and perhaps you won’t. But it gives you another point of view to consider.
If you decide to follow the author’s advice, remember that a large part of his advice is to really understand money, your money, and your investments. Don’t just jump into an investment because the author said it worked for him.
I do think that it would be an excellent book for recent grads to read as they start out. Again, they may embrace some ideas and discard others, but it gives them some other ideas to consider as they start building their own financial foundations.