'Rich Dad Poor Dad' Author Says He's Racked Up More Than $1 Billion in Debt

'Rich Dad Poor Dad' Author Says He's Racked Up More Than $1 Billion in Debt

• Re:

  My savings account pays 3% interest, which is really high, but it doesn't come close to inflation last year. I'd have done better with metals.

  • Re:

    Gold yes +11%
    Silver no -1%
    Platinum no -8%

  • Re: If you can get banks to lend you $billions...

    My uncle has been in precious metals and mining equities (all in) since the 80's and he said he's averaged a 4% return over that time. Compare that to an S&P etf. Only financially illiterate idiots buy precious metals and think they'll strike it rich...

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    Check out Ally or SoFi. They'll get you 4.6% or so.

• I think the decoder ring for his personal definition is:

  "assets" = appreciating assets
  "liabilities" = depreciating assets

  But, this whole article is playing with words to create a story. If somebody says "I'm $300k in debt" what they would normally mean is their net worth is -$300k. Somebody with a healthy income who takes out a mortgage for $300K doesn't say "I'm $300K in debt." But that's precisely what this is. His debt is in real estate, which has so far been and is expected to be an appreciating asset. It might turn out to be a bad investment and get repossessed, but there's no particular reason to expect that.

  • Kiyosaki is a BS artist. An asset is an asset, even if it is a depreciating asset. You'd be hard-pressed to find an asset that doesn't depreciate nor require maintenance costs.

    I sincerely doubt any bank is stupid enough to give him $1b, either. Stuff like LTV (loan to value) and sources of income are important to them. Everything he says is through some distorted lens.

    • Re:

      This isn't what Kiyosaki says. It has nothing to do with the 'value' but rather cash flow. If it carries a net negative cash flow he considers it a liability, if a net positive then it is an asset. A million dollar property with maintenance costs alone is a liability no matter how much it is 'worth' because you lose money by owning it, the same property used to generate enough revenue to result in a net $1 gain per cycle is an asset because you gain money by owning it.

      He might not be the greatest financial

  • Re: If you can get banks to lend you $billions...

    "with land in your hand
      you'll be happy on Earth,
      then invest in the church for your heaven..."

  • Re:

    "I think the decoder ring for his personal definition is:
    "assets" = appreciating assets
    "liabilities" = depreciating assets

    Sort of, at least for his core financial advice it is about cash flow rather than 'values' but I've really only read his original book played his game. Gold itself would be neutral but a business trading gold which generates positive net revenue would be an asset until or unless its revenue goes negative.

• The whole assets are liabilities thing has been his shtick to sell books on infomercials in the 1990's. In a sense he's not wrong. You may own your car and could sell it for money, but as long as you keep it you are probably losing money on that car paying for insurance and registration. Real estate on the other hand can increase in value and you could rent it out and you can write off many of the expenses in real estate through a tax mechanism called depreciation. It's not universal but it's not a concept exclusive to the US.

  Precious metals are usually garbage in my opinion. But they can't go to zero. While a stock can be pink listed and is effectively worthless. But most people would have pulled out before that happens, so it's not a fair comparison. I do invest in precious metals in an indirect way. I invested a little bit in companies that sell futures, because I figured there are a lot of dumbasses buying precious metals whenever the economy goes south. I ended up never selling that investment because it kept up with inflation, unlike my savings account. (those are a huge scam in the US. banks are really useless for average people here)

  • Re:

    "The whole assets are liabilities thing has been his shtick to sell books on infomercials in the 1990's. In a sense he's not wrong. You may own your car and could sell it for money, but as long as you keep it you are probably losing money on that car paying for insurance and registration. Real estate on the other hand can increase in value and you could rent it out and you can write off many of the expenses in real estate through a tax mechanism called depreciation. It's not universal but it's not a concept

    • Re:

      inflation rates briefly went above my current mortgage rate. I imagine if someone picked up a billion in debt before the pandemic that even doing nothing they are still in good shape. And if they used that cash and got a 10% return on investment? they're doing great.

      Devil is in the details with finances and investing. My problem with most of what Robert Kiyosaki is quoted as saying is it is only the catchy truisms used to sell books. Most people haven't heard his financial advice but only his sales pitch. M

      • Re:

        He sells a lot of books with a lot of advice. IMHO whatever value there is to his advice is contained in the general way of looking at and managing money and not in any advice he gives about specific investments. The thing about truisms is they are true and real advice that just about everybody knows and understands but almost nobody keeps in the working forefront of their brain and actively applies day-to-day. Most successful people are just people who take truisms seriously while unsuccessful ones are peo

• In fact, even a decent savings account does, because it pays interest.

  For quite a few years the interest in Euros were negative. While most consumers managed in various ways to avoid ever paying negative interest (yes, the bank would take money for having money with them!) bigger entities couldn't do that. The ones trying to avoid the negative interest (including relatively rich cities from Germany!!!) actually lost their money when the bank just went bust from just having too many deposits! Because a fraction of the deposits had to be with the central bank and they had to be paid this negative interest! Imagine that, for the safety of the deposits and to avoid the bank going bust some of the money sits with the central bank AND THEY HELP THEMSELVES FROM THEM of course making the bank completely unviable. You can't make these things up.

  • Re:

    Could you elaborate on this? Presumably the negative interest that depositors were paying to have their deposits held at the bank was less than the banks were paying to the central bank?

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      Precisely this, they went to a bank that wasn't charging this negative interest (but I'm sure was meeting all the requirements, not only in general for banks in Germany - which I guess are plenty of requirements- but also to keep lots of public money there). The ironic part is that the whole mechanism was built to prevent bank runs and generally help banks with liquidity. Instead it took away money constantly, for no good reason, just the opposite.

• In Kiyosaki's analysis, a luxury car (those were the kind he mentioned) is a liability because it is not being used to generate income. Also its value decreases over time (rapidly, in fact, compared to other things), so it is not a good store of value. On top of that, luxury cars are quite expensive compared to normal cars that can get you where you need to go just as well.

  It is still true that a luxury car of a few years of age, well-maintained, can be sold for a good chunk of money (to cover debts if necessary), but it is still significantly less than what it was bought for, so there is a significant net loss.

  Something like precious metals tends to hold their value over time, and in many cases increases value over time, so they are a much more reliable way of storing wealth. They still aren't great assets though, because they still aren't generating income.

  True assets generate income. The diverse stock portfolio is an example of such a thing. Though owning businesses and/or rental real estate is even better, in Kiyosaki's analysis. He is much more interested in things that generate "passive income" than in things that could be sold later for more money than they were bought for (though both still qualify as assets).

  A savings account only barely qualifies as an asset, because the interest is something like 3%. It barely keeps up with inflation, which means it isn't generating wealth (even though it is generating money). And often it falls behind inflation, making it a liability again. On top of all that, the saving's account is just a pile of dollars (unlike a stock which is a share of a profitable business that is merely measured in dollars when calculating net asset value). Dollars are very bad stores of wealth because their value is based on nothing (fiat money) and fluctuates a lot.

  The quotes given in the summary here were given without any context, so they are bound to be misunderstood. Also, most people are not billionaires or even multi-millionaires, and as such most people don't think of wealth in the same way that such people do. Some of the things that are sound and reasonable to a billionaire seem really strange to ordinary working people, due to this gulf in education and experience.

  • Sorry for responding to my own post but there is a bit more to say about debt.

    Normal working-class people usually borrow money for one reason: to live beyond their means. This ultimately makes them less wealthy and keeps them trapped in debt, which works out badly for them.

    Rich people borrow for two reasons: 1. to reduce the cost of the item purchased, 2. to leverage someone else's money for one's own profit.

    In the first case, a rich person might borrow money to buy a house because they wind up spending less that way over time. It is sometimes hard to understand how that works out without running the numbers. Basically, if the house costs half a million dollars and you just pay for that in cash, that half a million dollars is now stagnant. It's just sitting out on a field doing nothing. If, instead, I borrow that half million from someone else, and take MY half million and invest it in pure bonds, that half a million will generate me a steady income stream of 5% of its wealth (about 25,000 a year). So if the interest rate I must pay on the house is less than 5%, I am actually making money on my debt (though not very much, in this case).

    The above is the analysis when you buy things that you intend to use yourself (house, car, yacht, etc.). The better use for debt is to borrow other people's money to buy a business or other thing that will make a lot of money (much more than 5%), without you having to do a lot of work. Leveraging other people's money for your own profit is the fastest ladder you can climb for upward social mobility.

    So that's why being a billion dollars in debt doesn't matter. Even though he is paying interest on that debt, he is making much more money off of that debt than what he is paying for it.

    • Re:

      apart from all those that dont

      thats the same reason just stated differently

      in what sense are you liable for anything? sure you can try and start using the word "liability" in a new sense, but dont be surprised when you come up against some kickback.

      • Re:

        Those two meanings are not "the same reason stated differently."

        Living beyond one's means is done by buying things one can't afford. People get the thing they want by borrowing, and now they have a lot of debt to pay off over many years, and if they ever actually DO pay it off, they have spent more than they would have spent if they had just saved up for it and paid cash.

        In the second two senses (reducing the cost, leveraging other's money for profit) the person making the purchase might actually have enou

        • Re:

          I see your point but perhaps others don't, about living beyond your means. I'll use my sister and her husband as a explanatory example.

          They choose to always have two newish cars, too large for their means. Right now, a newish SUV and a pickup. Probably paid 30-40k for each. I have a 2010 Kia Soul bought used for $9k, paid off 8 years ago and still running fine. No car payments in those 8 years. Their house cost much more than mine - difference of 150k (350k vs 500k).

          Together, they make less money than

  • Re:

    This is an accurate summary of what Kiyosaki's preaches. His own personal success or failure in its application is just an anecdote, firstly because one can always fail to account for all costs when considering cash flow and secondly because all investment carries risk. One can make what are absolutely the right investment decisions based on current information and still end up holding a bag of steaming horrible decisions in the bright light of hindsight.

    I tend to think Kiyosaki's system has merit but the m

• Re:

  Your understanding is correct in business accounting terms, but Mr. Kiyosaki asserts that things are slightly different in terms of personal finance.

  If I not-hypothetically bought a $100,000 Cybertruck with debt tomorrow, I'd receive an asset arguably worth $100k and the loan would be a $100k liability.

  The value of that Cybertruck is unlikely to appreciate as a function of time. In five years, it might be worth 20% of its original value. (Call me an optimist.) By Mr. Kiyosaki's definition that represents

  • Re:

    Don't use debt to buy things that decline in value is not the worst personal finance advice I've ever hea

    
    
    Except that 99% of everything you buy will decline in value. You might get lucky and find something which turns out to be worth far more than you bought it [theguardian.com], but that is the rarity. Even the forks and spoons you buy to eat will decline in value if you try to resell them.

    
    
    If you're going to use debt, either pay it off before the interest hits (such as credit cards) or pay it down as quickly as p

  • Re:

    Anyone with decent credit can use leverage. For example, if you take on debt to purchase a vehicle, you have a predictable cost for transportation that you use to get a better job and improve your standard of living - if you limit your view to the future value of the vehicle, you miss how leverage can be applied elsewhere in your life.
    
    (and of course, stay away from $100k cybertrucks lol).

  • Re:

    "If I not-hypothetically bought a $100,000 Cybertruck with debt tomorrow, I'd receive an asset arguably worth $100k and the loan would be a $100k liability."

    Yes! And, conversely, for the bank (instead of you) - the 100K loan you took out with them is considered an asset to the bank. It makes them money. And, if you deposited 100K in that same bank, they consider that a liability (cause they have to pay it back to you at some point, or at least be able to pay it back to you).

    Kind of like relativity - it

• Re:

  "Maybe things work differently in the US, but what he is saying sounds like the opposite of how things actually are.

  He describes his cars as "liabilities", but they are assets. If he goes bankrupt, they will be sold off to cover his debts, right?"

  That is where criticism of him comes from. He redefines the terms asset and liability on the basis of cash flow rather than 'value.' If something carries a negative cash flow and costs money to own it a liability under his system whereas if it generates positive ne

• Re:

  "He describes his cars as "liabilities", but they are assets" - That depends on how you define an Asset. To Kiyosaki, an asset is something that puts money in your pocket every month. For example, a savings bond that pays interest, a rental property that produces monthly rental income.

  When it comes to cars, I think it's more accurate to describe them as depreciating assets. If you buy a car for $30,000 and a year later the bank repossesses the car how much will the car be worth? Likely around $24,000 or so.

• Re:

  I don't think he really understands the words he uses. I think he means that you should use debt to buy productive assets, ones you can expect to appreciate, like stocks. As opposed to unproductive assets that depreciate, like cars.

  Buying metals hoping they will hold their value is right in between the two. He's essentially betting that the banks have guessed low about the future inflation rate. Although since he's apparently also betting the banks have guessed wrong about his ability to pay, perhaps he's p