I've been working like a slave lately, racing to finish up design jobs and equipment submittals, burning the midnight oil, sometimes finally getting to sleep at 1AM. I get these bumps in workload sometimes, usually when a couple of projects come due at a time. It makes normal life hard. I have to make an effort to focus in my Talmud shuir when I haven't really slept much. It hurts to go jogging when I still haven't recovered from yesterday. And I have to set aside the joy of blogging for a few days at a stretch. Of course, after the rush is over, I can usually take a few days off to go hiking, visit relatives, or just chill out. During the rush, I'm so focused on meeting deadlines and pushing everything out the door that I'm not even foucused on the hours I'm working. Only at the end of the month do I put my billing together and realize that I've generated a modest pile of change.
Usually I just stick it in the bank to save for buying a home here some day. But then I was listening to the economic news and realized that, as interest rates are cut, the interest made on my savings is declining, while at the same time inflation is increasing, so that any money in the bank is effectively evaporating in value. I started researching somewhere safer to invest the savings. After listening to a lot of books on tape, radio programs, and the like, I began to consider some form of U.S. Real Estate. After all, the dollar is low, so it doesn't make sense to bring anything to Israel right now, markets are going down, and Real Estate tends to preserve its value and increase over the long term.
I've lately been trying to learn up on the whole subject of finance in general. After listening to various CDs, podcasts, and the like, and reviewing books, I stumbled on an audio version of Robert Kiyosaki's "Rich Dad Poor Dad."
In the book, he compares his "Poor Dad," his biological father who worked all his life in a high-paying but still middle-class job, to his "Rich Dad," his best friend's father who dropped out of high school but later became a multi-millionaire by following sound financial principles.
The basic premise of the book is to buy assets and limit liabilities. Kiyosaki defines anything that sucks up cashflow, be it a car or mortgage, as a liability, and anything that gives cashflow, like real estate or businesses, as an asset. He recommends starting one's own business because this allows you to lower what is by far your greatest liability, taxes, by deducting expenses.
He devised a "Cashflow Quadrant" system of four different styles of income, the employee, self-employed, business owner, and investor. The goal, Kiyosaki tells us, is to move from the employee and self-employed to business owner and investor categories.
The previous two paragraphs are all you will need. The rest of his book is simply repetition ad nauseum, illustrated with poorly-written stories. My first response is: duh. Of course you want to limit your liabilities and increase your assets. That's what "investing" means.
Still, I continued with the whole Kiyosaki brand, listening to some of his lectures and public speaking, some of which I found on you tube, and other stuff that I found in other places, and some of what he was saying began to set off alarm bells.
First off, while he talks about how rich people tend to be decent, the entire book is basically a slap in the face to his biological father. So much for, "Honor your father." Also, while he talks about the importance of being mathematically literate and understanding numbers, he gives absolutely no details. In some of his lectures, he talks about how he picked up a house on a tax lien sale (that's where you pay the back taxes for someone who is delinquent, and if they don't pay you back at interest, you get the house.) All the research I've done has indicated that this almost never happens, and when it does, it's on a property that you wish you had never set eyes on. On the "limiting your liabilities," side of his philosophy, you've got to wonder why he's always wearing expensive watches and fast cars. And if he's such a wealthy multimillionaire and now just wants to each us his secrets for the benevolent reasons he claims in his book, why is he flying all around the world giving $2,500 per head lectures? I could go on and on.
Fortunately, John Treed, another real estate advice writer, has done extensive fact-checking:
1. His rich dad does not exist. He gives certain hints about the rich dad, including that he was the father of his best friend next door, and gives certain dates and times they met. Research has proved that such dates and times would be mathematically impossible.
2. Most of his tax strategies would land anyone who actually tried them in a prison cell. You can't deduct your Porche as a transportation expense or your family "board meeting" in Hawaii as a business expense.
3. He constantly refers with pride back to serving his country during the Vietnam War in the Marine Corps. Of course, in his previous book, "If You Want to Be Rich and Happy, Don’t Go To School?" he claims to have been a conscientious objector who went AWOL.
4. Most of the gurus he refers to, including Robert Allen, who wrote the book, "Nothing Down," are currently either bankrupt, fugutives, or in prison. Birds of a feather flock together.
5. Many of the sweet deals he claims to have made in his book, if you actually sit down with a calculator and analyze them, actually generate a significant financial loss.
6. Forming a corporation often results in double-taxation, as both corporate profits and shares are taxed. Whether I deduct my computer and software I use for work as a contract worker, or I start a company and have the company pay for them pre-tax, it really doesn’t make a difference.
Reed has compiled pages and pages of Kiyosaki-related misinformation and swindles:
http://www.johntreed.com/Kiyosaki.htmlI remember a few years ago, when Kiyosaki-mania was at its peak, friends would come to me telling me how important it was to read his book. They always had that sort of smiley-vacant expression that you see in Jews for Jesus zombies. They don't want to help you, they want you to know that they are such geniuses for having realized something that us mundane unbelievers haven't. From the beginning, I understood Robert Kiyosaki's lack of detail to be the sign of a motivational speaker, a Jews for Jesus-type emotionalist, rather than any sort of rationalist. But on deeper analysis, Robert Kiyosaki appears to be more of a criminal confidence-trickster whose advice can ruin the life of anyone who is suckered by him. Sometimes you have to wonder how someone who utters vacant platitudes with conviction could get so far, but then again just look at a certain leading presidential candidate. The best money you will make from the "techniques" of Rich Dad Poor Dad is to limit your liabilities and save $10 by not buying it.