I disagree.. the most important message in the book is that business and entrepreneurship is the path to success, NOT being an employee and staying in the rat race. While it may be common sense to someone who's been in business for a while, or read a lot of similar literature, it's far from obvious to most people.
I'm not ashamed to say Rich Dad Poor Dad has been one of the most influential books I've read in my life. At 20, I had very little idea about business - I thought my path was clear: graduate with a degree, get a job, work up corporate ladder, etc. Reading this book was completely mind-blowing and eye-opening.
Yes, most of the advice is trivial, as I look at it now.. But there's certainly great value in the book - business vs "rat race", building assets vs liabilities, learning to sell, active vs passive income, what you can't afford your business can, value of financial literacy, and much more. But most importantly this: you can very rarely get rich working for someone else.
"the most important message in the book is that business and entrepreneurship is the path to success"
No, it may be one of the best paths to wealth and independence --unless you're born into wealth already -- but it's not necessarily a path to success.
My parents worked themselves to the bone in business, were repeatedly screwed by business partners and banks. It didn't give them one bit of gratification.
My mother went back to university and got into not-for-profit microcredit and was reborn as a happy person.
My dad spent time with his kids and neighbours, when he passed away he had three times as many people come to the funeral as we had space for.
Entrepreneurship has a lot going for it, but it is very hard and given the barriers that can be thrown in your face, it can be just another rat-race for lots of people.
I think history tends to be written by the winners when it comes to entrepreneurship. It's a lot harder- and a lot more luck involved- than many would admit.
I think the problem is not the failure to admit - most entrepreneurs would admit the struggle with honesty. It is more like an availability heuristic - success stories make the news, failures usually do not, and so many people have no idea what the success rate is.
Not necessarily. Only a very naive entrepreneur would fall for this and they would be sorted out rather quick. People fail or know/realize the huge amount of uncertainty and still choose to do startups. Different people have different levels of risk aversion and there is no common goal/value system.
It's been a while, but I'm pretty sure all of his books point out that 9/10 attempts result in failure; the trick being to see the failure early enough to recover and move onto the next attempt before it is too late.
Yes, and he also said that people lose three businesses before they succeed. But people are afraid to fail even once because traditional education teaches students that it's bad, terrible, wrong, etc. to fail.
You need to fail fast and keep tweaking your idea until it becomes a success. You also can't be married to one single idea. Many people have a problem with this.
There's definitely a lot of examples of non-entrepreneurs being happy and content with life. The message from RDPD I've mentioned is not about success in personal life, but financial success. And yes, there's tons of examples of businesses failing, nobody said it was easy, etc.
Another of Kiyosaki's arguments that I agree with on this matter is that sure, you can become very rich and successful doctor/lawyer/athlete/movie star. But that path requires outstanding talent, athletic skills, intelligence, etc. For an "average" person that doesn't possess any of those, and is not born into wealth, business is the best way to financial success.
I find it also depends on what profession you're in. It's tough to be content if you're a programmer and a non-entrepreneur vs being a teacher/non-entrepreneur, or social network, or nurse.
Also, success is not necessarily correlated with happiness. Success is more about getting what you wanted, while happiness is more about wanting what you've got.
Your point is completely valid if it were a book about success. It is a personal finance book, and I assume most readers are trying to find out "how do I become rich?".
Nothing is an absolute guarantee. No matter what the path.
"Were repeatedly screwed by business partners and banks"
If your parents were "repeatedly" screwed over, they really need to take a look at their own decisions. I was screwed over a few times when I was younger. I learned from my mistakes and don't allow people to screw me over.
Your parents might be too honest and nice, which leads to people taking advantage of them. This will happen anywhere, not just business.
"it can be just another rat-race for lots of people."
Some people just aren't cut out to own their own business. My parents, for example, could never own their own business. They are too nice and would get screwed over (my Dad has gotten screwed over more than once in his life in various business deals).
One thing is true: you will never be rich working for other people and this is really the point of the book. For me personally, I would rather make $50K working for myself than $100K working for a large company. It's mostly about the freedom than the money.
Nothing is an absolute guarantee. No matter what the path.
This is a ridiculous statement. You attempt to defend "business as success" by arguing success is never guaranteed. While being a silly argument, more importantly you seem to completely miss what your parent was talking about- he was not discussing how your business might not be successful, but that for many people, success in business != success in life. In the same way that money != happy.
"This is a ridiculous statement. You attempt to defend "business as success" by arguing success is never guaranteed."
I thought I was pointing out the obvious, but I guess not. Are you one of those people that believes that if you go to college you automatically get a job at the end? It's not guaranteed, but I would still recommend it because it will help you get a job. You are the one being ridiculous here.
The guy I was replying somehow thinks that the book is a guidebook and a guarantee at success. It's not. I was pointing that out.
"While being a silly argument, more importantly you seem to completely miss what your parent was talking about- he was not discussing how your business might not be successful, but that for many people, success in business != success in life. In the same way that money != happy."
Really? His parents were not successful at business so how can that even be used as an example?
If he was really trying to point something like this out, give me an example of someone that is successful at business but not at life.
From my personal experience, once you figure out what it takes to be successful at business, you will be successful at many other things in life.
Sounds more like inspiration and self-help than personal finance. You could point to any number of career paths and say, "This is a well-established route to wealth, and if you work very very hard and manage your money well, you can become wealthy this way." For example, there are high-paying specialties in law and medicine where the rat race really does lead to wealth. You have to outcompete 95% of the people in your field to become wealthy, but the same thing is true of entrepreneurship.
It is more about self-help that anything else, and the people who swear by it use it as an argument of why it is such a crappy personal finance book. But then they promote it as a personal finance book. Nice loop there.
"But there's certainly great value in the book"--I don't think there is. Here's why I don't think Kiyosaki offers anything useful in the categories of knowledge you've identified:
- "business vs 'rat race'": As others have pointed out, business is certainly not better than the rat race for everyone, or even most people. Based on every study I've ever seen, the reality seems to be that starting a business is only appropriate or beneficial for a small subset of the population. I.e. people with certain unique skillsets, a high tolerance for risk, and boatloads of time to invest.
- "building assets vs liabilities": In other words "make lots of money, and try not to borrow too much." Well, duh. Anyone who would even think to buy a personal finance book can probably appreciate that income is desirable and debt undesirable. They don't need Kiyosaki's help with that.
- "learning to sell": I don't think Kiyosaki offers anything close to a practical guide on improving your sales skills.
- "active vs passive income": Passive income is not a realistic goal for the vast majority of people. Even if you found a successful business, chances are, you will continue to invest large amounts of effort to keep it running profitably. You pretty much have to win the startup lottery if you want passive income. As the term "startup lottery" implies, it's a pretty rare occurrence in the real world.
- "value of financial literacy": This is just the same as saying "it's a good idea to know how to make money." Telling people to have financial literacy is worthless if you don't offer any useful education on finance. It's even worse if you instead offer patently wrong advice, such as ignoring your taxes in order to "pay yourself."
"the most important message in the book is that business and entrepreneurship is the path to success, NOT being an employee and staying in the rat race."
The best book that I have read that emphasizes this point is "The Millionaire Fastlane" — awesome, awesome read ... a must for anyone starting, running, or thinking about creating a business.
Tax breaks. A surprisingly large portion of the book is in praise (what's the opposite of a screed?) of having a company you control pay for your meals, car, and house so you avoid personal income tax.
Anyone familiar with this able to give a quick overview of the legality of this? I've looked into this before and it sounded to me like doing this too much (e.g. all your meals?) is dishonest and/or illegal.
The IRS has fairly straightforward rules to what meals can be deducted. The simplest rule is that four people must be present and business must be discussed. There are exceptions. You can't just deduct lunch, you would have to be 'away from the office' and could only deduct reasonable expenses. You couldn't buy lunch every day at Mortons or Ruth's Chris and easily deduct it. You can't easily count your daily lunches as expenses.
Reimbursing for mileage becomes tenuous if you work from home. Since you can't count commuting and you have no office, the mileage from your home office to your sales appointment isn't deductible. There are people that work around this by getting a PO Box that they 'check' before they go to a client meeting. A stop at the PO Box or ATM to check their balance becomes a business task. They can't deduct the mileage from their home to the PO Box/ATM, but they can deduct the mileage from the PO Box to the appointment.
Expenses on a business are taken directly against profits - to a degree. If you use a laptop 100% for business, you can deduct that (up to the Section 179 deduction cap) before having to use a depreciation table - typically MACRS5 which is unusually harsh in the tech world. If I had a nickel for the amount of equipment that survived beyond the depreciation table, I'd probably have 30 cents. If you buy that with your personal cash, you are paying for it with post-tax money rather than pre-tax money.
Health Insurance becomes another tricky situation. If you pay for it with the company, it becomes a taxable benefit, but, if you have employees in Florida, offering it to myself as an executive perk means I need to offer it to all employees, and pay 50% of their insurance.
These are brief overviews and an accountant would be the person to ask about what you can deduct and what he's willing to defend if you get audited.
There isn't really that much in terms of accounting to run a business. You get a credit card that you use exclusively for business expenses, and a separate checking account. Income from ventures goes into the checking account, bills for the expenses are paid from that, you pay yourself a monthly stipend. Whether you do a Sole Proprietorship, LLC or S-Corp, your income flows through to your personal tax return. A C Corp is subject to corporate tax, then, when you pay yourself you are taxed again on that money. That is the double taxation that everyone talks about, and, in certain rare situations, can reduce your tax bill. You also need to make sure that the business meets certain criteria and doesn't get treated as a hobby. You can't have dozens of money losing years, taking tax breaks and deductions all the time without the IRS getting suspicious. You can however win that case if you can prove through recordkeeping that you were indeed trying to make a profit, long incubation time, professional bookkeeping/recordkeeping, etc.
As for which company structure you choose, talk with an accountant.
Now, there are reasons to have a company structure rather than just getting 1099s. Two words, well, a word and an acronym: Simple IRA (or a SEP IRA depending on the company's size). Have excess cash? Rather than mucking with the paltry Roth or Traditional IRA, the Simple IRA allows you to put a lot more cash into a retirement fund. Pretax money with a company match that isn't taxed until it is withdrawn when you reach retirement age. Until you get more than 100 employees, this is one of the huge benefits. I believe your 2011 contribution can be up to $11500 with the company kicking in a 3% match of your compensation, not your contribution (i.e. earn $60k/year, you toss $11.5k of your pre-tax income, and the company kicks in an $1800 contribution). There are exceptions depending on age, coverage under other plans, but, it's almost as good as the investment sheltering provided to teachers - though, with their pay scale, very few teachers can really take advantage of the opportunity.
There are always ways around it and it depends on how far you're willing to bend the rules, and, if you bend it far enough to get an audit, whether you're still willing to keep bending.
There was a dialog in 'The Firm' that sums up how things work fairly succinctly. Tom Cruise was pitching the Sonny their tax planning pitch and it went something like:
Mr. Tolar handed you a schedule that virtually guarantees you zero tax with zero risk. [...] You defer your tax in full, even though you have a bankable LP.
Deferred till when?
What do you care, whenever it is, it is still the best interest free loan you'll ever get.
I have met people that will push, bend, and break the law because the penalty when/if they get caught is less than the income they made by using that money to make money.
It isn't something I would do or advocate, but, make sure your accountant is willing to walk up the steps with you to the IRS courthouse if you decide to travel willingly up that path.
In short, get an accountant (probably after April 15) and raise your issues. Tax planning is a very good strategy to have under control.
Added: forgot the reference to the home office deduction.
If you have a home office, it needs to be a space dedicated 100% to the business. It needs to fit the 'archway rule' which means it needs a door or archway that makes it a separate room. It can't be a room that you travel through to get somewhere else, i.e. living room, etc. You can then deduct a percentage of your expenses, electric, water, gas, etc based on the ratio of the square footage of the home office to your entire home. Now, here's the fun part. When you sell the home, if your house appreciated, a percentage of that is considered capital appreciation for the business.
I suspect it's referring to losing a job (a very big deal to most people) vs. losing a customer (not a very big deal to most well-run businesses).
Same with losing any resource that is concentrated in one supplier as an individual but spread out among multiple sources in a business. Could be cash flow/income or could be the loss of any number of real or financial or relationship assets that a diversified business inherently protects against.
Not that I want to defend any kind of selfhelp book but when it comes to loosing weight you are wrong.
Those two are by no metrics the same.
One of them gives you step by step advice (eat this apple, eat this brocoli don't eat fat) things you can act directly on and that can be measured the direct effect of.
If you follow the advice in most of these books you will loose weight.
There is no external factors involved.
With RDPD the external factors are extreme. Actually following the advice of the book wont make you rich.
I'm not ashamed to say Rich Dad Poor Dad has been one of the most influential books I've read in my life. At 20, I had very little idea about business - I thought my path was clear: graduate with a degree, get a job, work up corporate ladder, etc. Reading this book was completely mind-blowing and eye-opening.
Yes, most of the advice is trivial, as I look at it now.. But there's certainly great value in the book - business vs "rat race", building assets vs liabilities, learning to sell, active vs passive income, what you can't afford your business can, value of financial literacy, and much more. But most importantly this: you can very rarely get rich working for someone else.