What Robert Kiyosaki didn’t tell you
Money & You by YAP MING HUI (Saturday August 4, 2012)
A FEW months ago, I was having
breakfast with a friend when he told me about the seminar he was going to
attend in May to hear Robert Kiyosaki speak.
In the past year, he had read all the
author's books and had already taken out two maximum loans to buy properties to
rent out.
I was curious to know more. We barely
finished drinking our coffee when he insisted he had to leave.
He was going to the bank to apply for
another loan to invest in more properties. There was little I could say or do
to stop him from leaving.
As the day progressed, I could not
shake off an uneasy feeling that something was not right.
I worried that my friend might be
setting himself up for financial ruin. As I edited the opening pages of my new
book, I recalled my introduction to Kiyosaki's work and understanding of his
principles.
More than 10 years ago, at about the
same time when I made the decision to pursue a career as an independent
financial advisor, Kiyosaki published his seminal work, Rich Dad, Poor Dad.
In it, Kiyosaki challenged
the preconceived notions the middle class had about their inability to achieve
financial freedom.
In highlighting the need for financial literacy, the
advantages of becoming a business owner and investor, and overcoming obstacles with a positive
attitude, he underlined two fundamental concepts of financial freedom: a “can-do” attitude and fearless entrepreneurship.
I have no doubt that Rich Dad,
Poor Dad had a positive impact on millions of people all over the world.
Indeed, reading it certainly inspired
me to work towards becoming rich and doing this fast.
However, as time passed, I observed
that many Malaysians who adopted Kiyosaki's approach became trapped in the “rat race” with no way out.
This outcome was the exact opposite of what Kiyosaki envisaged in Rich Dad,
Poor Dad. I wondered why this was so and decided to read Kiyosaki's books
again.
It was clear that Kiyosaki's other
books built on Rich Dad, Poor Dad and helped to crystallise some
important theories about personal finance.
For instance,
·
you should
not spend more money than you earn.
·
It is important
to invest in assets rather than liabilities to build a passive income
from your investments.
This is how to make your money work for you so that you
become rich and wealthy.
Nevertheless, with the benefit of
experience and knowledge as an independent financial advisor, it was not long
before I became uncomfortable with what Kiyosaki was saying.
In the book he co-authored with
Donald Trump, Why We Want You to Be Rich: Two Men, One Message, he made
statements which implied that the only way out of the “rat race” for the middle class was to become rich.
Also, all the suggestions Kiyosaki
made were about “what to
do”; he never gave
concrete advice on “how to do it.”
For example, you must take on “good
debt” to become wealthy. This meant taking on more risk by acquiring loans to
invest in properties. However, he didn't show you how to manage this risk or the investments you made.
I feel that the approach Kiyosaki
advocated is muddled and has the potential to be both dangerous and misleading.
The closest analogy I can give to
illustrate my point is this: you're put in a Formula 1 race car and told not to
be scared as there's nothing to stop you from driving at the same speed as other
Formula 1 drivers. Only, you have never learned the special skills needed to
control a race car.
The fact of the matter is that taking on more risks does not
guarantee financial success.
Fraught
with uncertainties, it might get you rich quick, but it can also ruin you.
For instance, I know a 45-year-old bank manager who, inspired by Kiyosaki's work,
quit his well-paying job to start a business.
Two years later, his business is heading nowhere, he is on the
verge of eviction, his wife has taken the children to live with her parents and
the hire-purchase company repossessed his car.
Then, like my friend with whom I had
breakfast, many have taken out maximum loans with a view to getting rental
income and capital gain. However, they cannot find tenants or buyers and
struggle to make the instalment payments to the bank.
To be fair, let me state that I am in
favour of what Kiyosaki proposes; in fact, we share a common purpose: both of us want to help people
to get out of the “rat race.”
However, I feel that, on the whole, Rich
Dad, Poor Dad and other books by Kiyosaki are no more than successful tools to motivate
people to think about how to manage their personal finances.
It is unwise for Malaysians to use
Kiyosaki's work as the only guide to acquiring wealth. In other words, getting rich is not the only way
to get out of the “rat race.”
I am confident enough to say this
because I have discovered a more plausible and less risky solution to becoming
wealthy.
Instead of jumping straight into
taking on more risks and acquiring debt, take a metaphorical step back and start by
optimising your existing financial resources.
The aim of doing this is to help you
work towards becoming financially free.
The by-product of this exercise is
that you will acquire
knowledge and experience about how to manage financial risks and
investments.
When you have become financially
free, your position is secure.
Only at this point is it wise to
start applying Kiyosaki's concepts and ideas to increase your financial risks
and acquire more wealth.
When you adopt this approach, rest
assured you will enjoy peace of mind and have the ability to focus
wholeheartedly on creating more wealth regardless of the outcome. This is because
you will know that you are financially secure. By far, this is a more certain,
safer and better approach to becoming wealthy.
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