Home' Trinidad and Tobago Guardian : July 26th 2015 Contents SBG4 PERSONAL FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JULY 26 • 2015
Rich Dad, Poor Dad is two years away from
celebrating its 20th anniversary, having been
initially self-published by its author, Robert
Kiyosaki, in 1997. Since then, Kiyosaki---a
fourth generation Japanese American whose
net worth is estimated by Forbes to be US$80
million---has built a franchise around the best selling personal
finance tome, including other books, seminars, workshops, a
game and has even included his wife and his sister in the act,
both publishing their own personal finance works.
If you haven t read Rich Dad, Poor Dad yet, the Sunday BG
warns there is going to be some spoiler information in this arti-
cle.In essence, Rich Dad, Poor Dad, is a retelling of Kiyosaki s
financial education at the hands of his two "Dads" while growing
up in 1950s Hawaii. Poor Dad was his real father, Ralph Kiyosaki,
a PhD-holding senior public servant who, despite his education
and status, struggled financially his whole life.
Meanwhile, the unnamed Rich Dad was the father of a friend,
who never finished school, yet was able to amass a business
empire worth millions.
The divergence in paths, posits Kiyosaki, had everything to
do with their financial knowledge.
Poor Dad sought a traditional education; an education Kiyosaki
said taught him to be an excellent employee and to work for
money. In contrast, he said Rich Dad learned about money and
how to make money work for him. The result was even though
he was not as educated as Poor Dad, Rich Dad s net worth far
Following his Rich Dad s advice has been responsible for his
successes today, says Kiyosaki.
But beyond the two men, Kiyosaki says their respective stances
are representative of the divide between the poor and middle
class and the rich.
According to the author, the rich are able to make money
work for them by acquiring assets, which Kiyosaki controversially
defines as anything putting money into your pocket. The poor
and the middle class, on the other hand, acquire liabilities,
which, they have been misled by traditional education into
thinking are assets.
One of these is a home. Several readers may have pulled up
at that one.
Isn t homeownership a sign that one has "arrived"?
Aren t we always told that a home is the most important
asset one can ever own?
Not according to Kiyosaki.
In Rich Dad, Poor Dad---which has sold 26 million copies
since it was picked up by Warner Business Books in 2000---
Kiyosaki says while the rich do not hold their wealth in their
homes, the majority of the America s poor and middle class
do.According to the Wall Street Journal in an article last Decem-
ber, the wealthiest one per cent of Americans hold 47 per cent
of their worth in business equity and other real estate versus
only nine per cent in their principal residence. Contrast this
to the middle class who have as much as 63 per cent of their
net worth tied up in their homes and only nine per cent in
business equity and other real estate.
Kiyosaki adherents say the collapse of the US housing market
in 2008, and the resulting financial hardship for those of the
poor and middle class, showed him to be right on this point.
The personal finance author demolishes several other sacred
Have an expensive university education?
Kiyosaki says you are likely to be well on your way to remain-
ing in the rat race; a never-ending Catch 22 of employment
by others, increasing debt and decreasing income to meet
them as the years pass.
Instead, he advocates having increased financial literacy, the
value of which, he argues, far surpasses that of a traditional
education. He also supports becoming a business owner, or
preferably, the owner of assets that generate passive income*.
And on taxes?
Kiyosaki says the poor and middle class pay too many taxes,
while the rich take advantage of tax breaks, adding to their
wealth, because they keep more of their income in the first
place. One of the ways they do this is through corporations.
If Kiyosaki is to be believed, he has used corporations he set
up to write off meals and vacations.
Rich Dad, Poor Dad has drawn praise for its advocacy of
increased financial education, re-defining the way people view
assets versus liabilities and its easy readability.
However, the book has also drawn much criticism for pro-
moting what some financial commentators call "bad advice".
Kiyosaki has also been called out for making up the "Rich
Dad" character of the book.
On acquiring assets (Kiyosaki defines these as real
estate, stock, bonds and intellectual property) and gen-
erating passive income versus working for an employer.
Essentially, what is being said here is that there are two
ways to increase your wealth as measured in monetary terms.
Either you work for money or you have money work for you.
The two are not mutually exclusive. So, while you work for
money, the best advice is to set some of that money aside
and put it to work for you.
One can start with bonds, then move to stocks and eventually
through patience and perseverance up to real estate. It should
not be viewed as an all or nothing scenario but rather a pro-
gression. If, as you have pointed out, real estate is out of the
reach of most people then consider a fund that can provide
exposure to real estate.
For a number of reasons these have not been popular in
T&T, but if you develop a clear strategy for what you want
to achieve, then there are ways to accomplish those objectives.
For example, you may use your TT dollar savings to acquire
bonds and stocks, but seek to acquire US dollars in order to
invest in US real estate investment trusts (REITS) that can
provide some exposure to the US property market.
Appreciate that every investment has its unique risks and
while we tend to see real estate as something that always goes
up, remember what happened in the US in 2008 and in T&T
in 1986-88. As you will note from the discussion above acquiring
a property through debt is not necessarily an asset.
After all is said and done, appreciate the basic point is that
as hard as you work for your money, it is even more important
that your money works harder for you if you want to create
wealth and secure your financial future.
On exploiting the tools of the rich (such as creating
corporations) to take advantage of tax breaks and preserve
It should be clear upfront that setting up a company carries
additional costs that must be factored in to any investment
decision. Issues such as filing annual returns and even the
preparation of accounts need to be considered. Where this is
most common is the use of a company structure to own prop-
erty. The expenses of maintaining the property can be matched
off against any income derived from the property and further
it may be possible to manage the stamp duty implication on
disposal by selling the company that holds the property as
opposed to selling the property itself.
Appreciate that one should not go down this path without
the necessary accounting and tax advice and this also carries
A basic rule of thumb is that only expenses associated with
the business can be deducted for tax purposes therefore one
needs to be careful when trying to pass personal expenses off
as that of the company.
Rich Dad, Poor Dad
Turning personal finance on its head or clever sham?
Continued on Page 5
Author, Rich Dad, Poor Dad
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