Rich Dad, Poor Dad Book is Rich with Bad Advice

As a young working professional, I struggled with balancing my paycheck against my needs: rent, groceries, transportation, dry cleaning, medical expenses, personal care products and occasional entertainment and travel. Frustrated at how much of my paycheck disappeared to federal and state taxes each month (having worked out that after taxes and rent my disposable income was about $14,000 per year) I took advantage of an opportunity to see a professional financial planner for free.

I got my first taste of the consumer and debt-driven society not only in trying to reign in my own spending habits to save money (though my habits were not extravagant) but when the financial planner said to me: "Wow! You actually have a written budget! I never see someone your age with a written budget. Usually, young professionals come in with a mound of credit card debt and no plan." Shocked by her response, I went on to ask whether she knew of any way to save money in taxes or to further reduce my budget. "No," she replied, "looking at your numbers, you're pretty much in the same boat as everyone else at your age and place in life." I left disheartened, having hoped for answers that would allow me to save money each month and possibly reduce my taxes. Instead, I was informed that I was doing "better than most" in my situation."

Searching for answers, I have since read a cadre of books that claim to be the solution. Many of these books advocate opening your own business as a solution to financial woes, or learning how to buy other's businesses instead of starting your own. Others tell you that by learning to act out of a set of principles involving positive vision, attitude and thoughts, money will flow to you naturally since you are more "in harmony" with the law of attraction for money (i.e., your current bad attitude in worrying about money is preventing money from coming to you, as if magic employers appear out of nowhere and pay people they've never even met for their "hopeful attitudes" about money). These "it's your attitude rather than your actions" books play on the hopes of people in real financial need, looking for advice to aid them in their very real troubles.

I had sincerely hoped to find a book that would teach genuine financial literacy in the "Rich Dad, Poor Dad" bestseller written by Robert Kiyosaki. I had heard for years from professional friends that it is the ultimate book for helping the poor better manage money and enjoy the American Dream. However, I found it to be an insulting repeat of all the other "rich philosophy" books out there in the marketplace. For instance, Kiyosaki routinely tells us that advising our children to "go to school, study hard and get a good job," is terrible advice that will put them on a path to paying the highest taxes and working harder than they really need to throughout their lives.

Kiyosaki contends we should eliminate phrases from our vocabularies like "money is the root of all evil" and "I can't afford it," and replace them with phrases like "how can I afford it?" and "money is power." He talks a lot about learning financial literacy as a means of getting out of the "Rat Race" of going to school, getting a good job, working to make ends meet, asking for a promotion, seeing your expenses go up, working more hours to get another promotion only to see your taxes and expenses go up even further, and sinking you and your family into cycles of debt.

This is very compelling language since no one wants to be stuck in the Rat Race, and many families are facing a real financial crunch, but the solutions offered are more of the same from the nouveau "rich" around the nation: learn how to personally profit from other people's home foreclosures, and learn how to profit from other people's hard work by buying their company stock when it's increasing and getting out before it dips (thus making money simply through a few sleight-of-hand investments... Kiyosaki actually says in the book on page 154: "There are forms of insider trading that are illegal, and there are forms of insider trading that are legal. The reason you want to have rich friends who are close to the inside is because that is where the money is made. I'm not saying do it illegally, but... that is what friends are for. And that is financial intelligence.")

It doesn't seem to me that the best message to give our children is to become rich based on other people's mistakes or misfortunes, and through "tips and tricks" to game the system and make certain you are smarter than the rest of those poor suckers working hard and paying their taxes in the Rat Race. This type of thinking will certainly not lead to more ethical business leaders in the future who will help families by providing secure jobs with good benefits in exchange for excellent work. Is the best solution to spend decades of your life learning how to avoid paying a lot of taxes, or to realize that high taxes place a hardship on families? Why not spend that energy to instead elect leaders who will help lift the tax burden placed upon families?

Kiyosaki explains how rich people avoid most taxes, but poor people are not smart enough to do it because they are not "financially literate." He never talks about the fact that taxes crushing the middle-class is a reflection of a poorly-run federal government, or of the need to reduce taxes to give families a fair break, or how inflation caused by massive federal government overspending drives down earning power in our nation, reducing the minimum wage to a near-worthless amount if families want to be fed, clothed and sheltered in today's world at today's prices - leading to the creation of more poor families rather than helping to lift people from poverty.

This is a dramatic fact to miss considering that most Americans pay at least 40 percent of their income to federal and state governments (working until May for the government and working for themselves and their families the rest of the year at the current tax rates) and are even taxed on the income they pay in Social Security taxes. Many families would be able to make ends meet and pay their mortgages (even if housing prices are inflated) if the government would ease its tax burden, which inhibits economic growth and prosperity while placing a hardship on families across the country. Kiyosaki would call this "blaming the government for your problems," but I would call it responsible citizenship.

Kiyosaki talks a lot about his hard work to become rich, which I am certain was true, but must it be done while lambasting those who are poor? Not every person is "motivated by fear" in choosing a job, as the book contends. There are many people motivated by a desire to accomplish something of worth, to contribute to the world, to work with people in need, or to create an excellent service or product to make people's lives better. Their hard work drives up the stock market Kiyosaki benefits from investing in. In fact, the "Rat Race" is the machine making Kiyosaki rich.

Whether intended or not, Kiyosaki also gives advice that could be straightforwardly dangerous to readers' financial health. He advises that the principle of "pay yourself first," which most people take to mean always being sure to put part of your paycheck into savings, instead means that you should stick to that principle so literally that you pay your overdue bills and creditors last, even if it means you get collections calls and bad credit ratings. "There have been months in my life," he says on page 158, "when for whatever reason, cash flow was far less than my bills. I still paid myself first [though] my accountant and bookkeeper screamed in panic." He calls this method "having the guts to go against the tide and get rich" while later admitting: "I generally pay [the creditors] right away anyway." That kind of advice to avoid your creditors may work if you have assets to sell or invest to make more money to quickly pay off any debts, but wouldn't it be a better rule of thumb for most of us to meet our obligations instead of trying to invest our money in the hopes of paying off creditors while our families fend off collections calls and carry around the burden of unpaid bills?

I also thought it was a tragic commentary throughout the book that Kiyosaki continually refers to his real Dad as being "poor" even though this man worked all his life to provide him with a home and food on the table, and tried to teach him good lessons in values, such as that education is more important than money. Kiyosaki admits that he stopped listening to his Dad when he was only nine years old because his Dad was not "rich," noting that his real Dad left bills to be paid when he died, but his other "Rich Dad," who was really his friend's father, succeeded in life because he left millions of dollars to charitable causes upon his death, even though it is clear from the book that this man barely saw his own family as a consequence of building his wealth, and routinely looked down on others who were not as "smart," and were "ruled by fear" because they tried to find secure jobs.

There is nothing wrong with making money, but there is definitely something wrong with looking down on those who don't.

Also, there is good in doing good, whether you are rich or poor. Kiyosaki fails to see that fact, instead equating poor people to those who are ignorant and financially illiterate; those who will, quoting his Rich Dad, "die a boring old man [with] lots of friends because you were such a nice hard-working guy [who] spent life doing the right things, playing it safe... but the truth is, you let life push you into submission" (page 28). What is wrong with leaving a legacy of a life well spent to your children, and not spending all of your precious time in this life on the goal of getting rich? Instead of imparting information to help people sharpen their ability to budget, spend and invest wisely, this book instead pushes its twisted worldview of getting rich above every other life goal.

Unless we are left a bequeathment from a rich relative, money comes for most people in the same way: through hard work, wise saving and spending habits, and not trying to "keep up with the Joneses," who now, by the way, have foreclosed on their large and expensive house somewhere in the abandoned neighborhoods of California, where entire suburban neighborhoods are now imperiled by frogs and bacteria (all that is left of the swimming pools their owners could no longer afford!)

Be wise and avoid reading "Rich Dad, Poor Dad." Instead, look at Dave Ramsey's books "Financial Peace" and "Total Money Makeover" for sound advice from a man who holds to his values and walks the walk. He recovered financially after bankruptcy and has spent his time since teaching others how to avoid his past financial pitfalls, and prosper - even in an economy such as this one. Another great find if you do not see your income increasing any time soon is to read "America's Cheapest Family" by Steve and Annette Economides to learn how to cut your spending without sacrificing your lifestyle to the point of pain.