Rich Dad, Poor Dad, Robert Kiyosaki's recounting of the lessons he learned from his "rich" mentor and surrogate dad, a wealthy businessman, and his "poor" biological dad, a high-level civil servant, has topped the best seller lists for over a year.

Obviously, there are many Americans who feel that the financial education they received from their own parents was inadequate or misguided, or that, perhaps, it was suited for the industrial age but not for today's information age.

When I first read Rich Dad, Poor Dad, I recognized my own father in his "poor Dad." My father worked for the city of New York, reaching the very highest position in civil service and, eventually, accepting a political appointment at an even higher level. When he retired, he worked as a financial consultant for a municipal museum three days a week. And although he did very well by government standards, his pension, twenty years later, had never gone up with the cost of living, and he had never had the opportunity to build a real nest egg.

Having grown up during the depression, he followed the best rules he knew for a safe, secure life, and told us to follow those rules, too. My brother works for the federal government, and my sister is a bank VP. And although I'm currently self-employed, I, too, worked for the federal government for four years.

But, being as old as I am, I've seen how American corporations have changed forever, due to mergers and acquisitions, the global economy, the busting of the Air Traffic Controllers Union by Reagan, and the desire to please stockholders above all others. Job security is gone forever, along with defined benefit pensions and lots of other perks that workers took for granted.

We have already taken some of the lessons we learned from Rich Dad, Poor Dad to heart when we made our latest move. We rented a house for eight months and searched for a house that was less than we could afford. Much to our amazement, we found a magnificent house that exceeded our wildest expectations at a price that was half what our previous house had cost.

My husband has been exploring self-employment by selling books on Ebay. He has taken his expert knowledge of collectibles and begun to make it work for him. His book-hunting expeditions have branched out to hunting for saleable as well as personally collectible pieces.

I have begun selling advertising for one of the regional publications I write for. Doing any kind of selling is a real challenge for me, because I fear rejection, but I really believe in this product (a parenting publication) and that helps. In doing this, I am learning more about what it's like to own and operate a publication myself.

The area of the country we live in is one of the best for small real-estate investments, and I am starting to explore the possibility of investing in real estate.

I decided it was time to read Kiyosaki's second book, Cashflow Quadrant.

Cashflow Quadrant reprises the story of Robert Kiyosaki's childhood, learning what not to do financially from his biological dad, the former superintendent of schools for the state of Hawaii, and learning what to do financially from his "surrogate dad", a wealthy business owner and real estate investor. It goes into greater specifics about what people should do to become financially independent.

He postulates that money is earned in four different quadrants--through Employment, Self-employment, Business ownership, and Investment. Financial freedom is found by becoming more and more involved in the B and I quadrants.

Employees, Kiyosaki says, work to enrich their employers. In addition, because they have fewer tax benefits available to them, they try to save on taxes by purchasing bigger and bigger homes in order to deduct mortgage interest and taxes from their returns. A home is not an asset unless you own it in full. If it is mortgaged, it is an asset of the bank's, and your liability. Only "assets" which are paid for by others are truly assets. An investment property with a positive cash flow is an asset, because renters are paying the mortgage. Kiyosaki believes that borrowing money is fine as long as others are paying it back for you.

Self-employed people can only increase profits by working longer and harder themselves, because they are professionals or sole proprietors. This is why, he says, doctors have a lower life expectancy than the national average. In addition, tax changes in the 1980's prevented professionals from incorporating as C corporations, which offer greater tax benefits, and forced them to incorporate as S corporations, which offers them far fewer tax breaks.

The difference between a business and self-employment, Kiyosaki writes, is that a business owner can leave his business for a year and return to find it is running as well or better than it had been the year before.

Kiyosaki describes three types of business systems:

- The traditional C corporation, where the owner develops his own business. This system usually requires the greatest capital investment and the greatest amount of bravery. People considering starting their own businesses should work with mentors and seek to educate themselves in every aspect of business ownership.
- Franchising, where owners buy an existing business system. Kiyosaki recommends that franchise owners follow the franchise rules exactly and avail themselves of all the advise, help, and support that is offered.
- Network Marketing allows people to buy into and become part of an existing system. It is usually the most economical way to start a business.

He describes seven levels of investors: those with nothing to invest, borrowers, savers, "smart" investors (or gamblers), long-term investors, sophisticated investors, and capitalists.

Sophisticated investors are those who accept the challenges of riskier investments and are usually not diversified. Capitalists are investors who invest directly in businesses.

Kiyosaki warns readers that they must develop good long-term investing skills before venturing into the realms of "sophisticated investors" or capitalists.

Becoming a long-term investor means minimizing debt and liabilities, developing a long-term financial plan, setting goals, and making small, regular stock and mutual fund investments.

He ends the book with seven steps for "finding your financial fast track":

- minding your own business, or preparing a financial statement and setting goals;
- taking control of your cash flow;
- learning how to manage risk without taking undue risk;
- deciding the type of investor you want to be;
- seeking mentors;
- learning from disappointment;
- having faith.

What makes Kiyosaki's books different from other financial books is, I think, the way he shares his story in a way that most of us can relate to. People who liked Rich Dad, Poor Dad will find more specific, action-related advice in this book.

Although he advises people to become more active in the business and investment quadrants, he is, in a sense, very conservative, advising them to seek mentors, attend workshops and seminars, read financial publications, and get the very best financial education they can. To this end, he has developed a number of other resources, including a game, called Cashflow, which is available at his company's website, www.cashflowtech.com

Kiyosaki's books would make a good gift for young people starting to embark on careers, and I intend to loan mine to my sons.




Recommended: Yes