Is "Rich Dad Poor Dad" a Fraud?
economistwritingeveryday.com
economistwritingeveryday.com
Don't invest in real estate. If it was a free lunch, someone else would eat it first. VTSAX is way less work.
All that matters is the savings ratio. Everything else cancels out. I promise. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...
So a penny saved is actually worth more than a penny earned, because it means you need less invested to retire.
If you live on 100% of your income, you are doomed, you can't save anything.
If you live on 90% of your income (ignoring market returns for simplicity) you "earn" one year every 9 years or so.
If you live on 50% of your income, you earn a year every year.
And if you somehow got down to 10% of your income, each year you worked would be nine years you wouldn't have to.
This math works with 0% return (or a return matching inflation only).
What it takes to retire early or at least be in a situation where a job loss, or other difficult life situations wouldn't effect you all that much is known for ages. Acting on it is just a totally different thing altogether.
And this is not just restricted to money. Nearly everything is like this. You could have a habit to read everyday, do push ups and eat healthy. You just have to do a little of this everyday. But most people struggle to keep up.
Success is doing boring things. Unfortunately since being boring is unattractive, some people actively avoid succeeding.
It really does come down to "we know what we have to do, but it's too f**ing hard and/or tedious".
And it's also why everything seems to coincide; those who can maintain physical fitness often have the wherewithal to maintain financial fitness, etc.
And arguably not worth doing. Tomorrow may never come -- you could get hit by a bus driving home today.
Studies show that a lot of poor people spend money immediately because their lives are often crazy uncertain and trying to balance and pay debts -- which they may never pay off -- doesn't get them anywhere. Blow the money on a new xbox now, because even if they pay the rent today they probably won't be able to stop eviction next quarter.... but at least they have an xbox, and can take that with them to the next flophouse.
It should be adjusted by current and expected returns. Else, it becomes an asset bubble with insane multipliers of real returns (like today). You are just counting on someone else to buy the stocks when you sell in the future.
If it is not your primary home, it may be correct, but not necessarily.
And only saving is not enough, because inflation can eat it all.
Really, just look for opportunities. Something undervalued, or something you are in a special position or have the skills to leverage (eg you are great with people and like DIY, go ahead and do rentals). That isn’t very easy though, and definitely doesn’t fit into a book.
It's just not happening.
I did buy a home (a flat, really) rather than investing and my mortgage payment is pretty much the same amount I was paying in 2014 for a single room as a student (same city, high cost of living).
Housing usually is the primary and largest expense every month, so it makes much sense to get that sorted out and stabilized.
This of course assumes that you plan on staying in that city (I've been in the same city for the last 11-12 years). If you're not sure you'll be in the same city in 3-5 years then sure, go ahead and rent.
> It's just not happening.
Buy versus rent is pretty complicated, and specific to each market and timeframe.
You are right that rents will increase over time, but so will the value of invested assets. While I cant speak to your youtube videos, it is not crazy to assume that the value of invested assets will increase at least as fast as rents.
Also, even if your mortgage payment is flat, that doesnt means housing expenses are flat. Taxes, insurance, and maintenance should be expected to regularly increase on property you own.
In general I have always found the passive investment "standard smart advice" to be wrong, but I'm a contrarian by nature. I actively manage everything because I like to know what's going on.
I would also rather be an engineer than fix apartments.
Wow, I'm a genius!
Depending on the market that may be so easy you'll think everyone else is stupid. Or it may be so hard you wonder if you are doing something wrong.
- you previously spent time building relationships with contractors. You didn’t just type in property management in Google
- a significant overhead goes to insurance and management. Your comfortable putting money as needed into the venture. You have knowledge of legal pitfalls of being a landlord.
- you regularly spend time managing these contracts
I know a number of people who have done very well with RE, but they all actively manage their properties.
It might be an okay investment for me (I'm a salary man, can't be bothered with freelance work), but for him I'd bet it's a money loosing proposition
[edit] the 500€/hour is an outlier, he wanted out of a project and kept increasing his rates, which were accepted up to that point.
First, and most obvious, it increases how much savings you have. But secondly, he states that you permanently decrease your expenses, making that magical 4% withdrawal rate of your savings easier to attain.
And yes, while that is true on the surface, the underlying message is - if you just don’t have cable tv (streaming in today’s world) and other things like cars and basic vacations, then you are almost there! And yes, if you want to live as a monk then this could be considered by some as a noble thing. But some want to live reasonably comfortably (new-ish car, trips to places like disney world with the kids while staying in a nice hotel vs biking and camping).
I only bring this up because even mister money mustache has admitted that he is unusually monk-ish in his lifestyle choices. Don’t get me wrong, I actually retired 7 years ago partly on reading his blog, so I get it. But we have to be realistic on what his message is and what others are liable to achieve.
I guess what I take most umbrage with is, he says that it is easier and more effective to cut expenses than raise earnings. And just like a business, this strategy quickly runs into diminishing returns. Raising the top line while keeping expenses reasonable is always the best strategy to an early retirement (or a successful business).
Woahhh there, thinking camping is an inferior trip is wrong. Being cheaper isn’t inferior.
My main point is really this - be real with yourself on how frugal you can reasonably get sustainably. If you try to be as frugal as Mr Mustache and that is beyond your level of comfort, you are going to fail and/or be miserable and wonder why you are not enjoying your retirement because it is based on false figures.
Real Estate is the one investment that most people can own, manage, improve as individuals without a ton of special skills/knowledge. Additionally, you can choose the amount of leverage you want to apply and there are considerable tax benefits.
If you have the time, a little knowledge, and enter at a decent time in the market with not TOO much leverage, Real Estate is an excellent long term investment.
House prices rise because of lack of supply, people are unable to make down payments/get approved, people can make rent though, which is more expensive than the mortgage on the house they are renting.
In the past renting was a stepping stone to home ownership. But now it's become more and more a lucrative trap to hold people down in as home prices have skyrocketed. Landlords are double dipping where the home value increases also means that the rent they can charge increases. Meanwhile tenants get slapped twice over, their rents rise and the cost of a home runs away from them.
Sure it can be lucrative, but at least right now it feels like a really dirty way to make money.
In my European country, you need to stay 5 years in the appartement you bought, otherwise you need to pay back a large amount of registration costs (tax) back.
It turns out our capitalist system associates very few returns to human flourishing!
Medical is similar, since it's basically "pay us this or suffer/die", but the returns from medicine are generally fairly lackluster since there is so much cost/risk in failed trials.
The returns in real estate ONLY look amazing because of the leverage.
However, your own HOME being leveraged can make the returns astronomically insanely good.
Sorry, I'm not super knowledgable about this topic.
I picked a random house in Southern California, it is up 42% in the last 10 years, sounds great, right?
But that is only an annual rate of return of 3.572%. Nothing at all exciting.
Where it becomes exciting is where you bought that $500k house ten years ago with $50k down, and sell today for $800k - ignoring everything else like taxes, etc, you made $300k on a $50k investment (leveraged) - which is an 18% a year return. THAT is something to take notice of! Of course, you have to factor out all the associated costs, but the leverage is the be-all and end-all of your "investment". If you could leverage against stocks the way you can against single-family houses, you could go nuts.
The advantage to leveraging real estate that you live in is that you basically have a heads I win, tails you lose scenario; if the house crashes you walk away (at least in non-recourse states like California, and practically almost everywhere).
The people who bought it from me tried to flip it but walked right into the chainsaw of 2008 and had to sell it at a loss. I could have bought it back for even less than I paid for it the first time a year later! Whoever did buy it got a great deal because now 15 years later it's worth $1.3 million and I feel like I should have just kept it. I definitely haven't managed to save $1m in the last 20 years.
The problem is that in those 10 years you also paid a bunch of interest on the mortgage necessary to buy that house. For instance:
Assuming a 20 year mortgage with a fixed 5% interest rate, in 10 years you paid 200k just in interest. Makes that 300k look really much less appealing.
It's a bit more complicated than that though:
- A house mortgaged 10y ago isn't paying 5% interest.
- A house mortgaged today isn't necessarily going to be paying 5% interest for the life of the loan, one can refinance if/when interest rates become more favorable. Interest rates are set to start coming down next month.
- 20k/yr in interest isn't really 20k once one factors in the tax deduction on that money.
- Making 300k by other means is a lot harder, requires a lot more capital or much riskier leveraging than an asset like a home.
You get any tax deduction on your mortgage payments???
And even then, only the amount above the standard deduction is effectively deductible, so it kind of is a wash.
(Fun fact - if you have an expensive enough house it is better NOT to be married to your spouse, as if so each can claim up to $750k of mortgage, whereas as married it's only a total of $750k or something. I don't know the actual numbers, never been close to that.)
Also it's a bit of a wash, as prices end up reflecting the tax break because bidders are ultimately going right up to their budget, and they take that into account.
I wish there was enough housing so that it isn't seen as some sort of investment vehicle that distorts prices for basic human necessities.
This is an oversimplification.
It reminds me of those retirement calculators that estimate retirement based on a percentage of current salary, without considering that income and expenses change over time.
We don't aim to live on ramen noodles for our whole lives.
From your link:
If you save a reasonable percentage of your take-home pay, like 50%, and live on the remaining 50%, you’ll be Ready to Rock (aka “financially independent”) in a reasonable number of years – about 16 according to this chart and a more detailed spreadsheet
Example numbers:
Take home: 50k Spending: 25k
Ok sure we can say that if nothing changes and historical returns approximate themselves then this person can retire in 16 years. But that's not going to happen. Things are going to change.
Say on year 5 after career advancement + kids it changes to this:
Take home: 100k Spending: 75k
Now the numbers point to a different retirement date (even though the annual saving amount is the same). Which means that the original 16 year estimate is already out the window.
Then on year 6:
Take home: 40k (lost job, looking for a new one) Spending: 60k (still got to pay the bills - from savings)
Now the numbers from year 1 and year 5 are even more further off. And the simple snapshot says they'll never retire now due to a negative savings rate.
I know people that invested in property and they either didn’t consider the risks they are taking (not servicing boilers) or the time managing tenants. If you end up with a court case, you are going to shorten your life through stress.
I get it that mortgage money is cheap leverage, but I think the good times on that have run out.
e.g. VTSAX doesn't have tenants who strip the copper out of the house and leave water running to spite you as you evict them.
VTSAX doesn't have surprise 15k roofing costs.
VTSAX doesn't for you to pay tenants triple if you don't follow / screw up rental laws.
VTSAX has a fairly small fee compared to what property managers charge.
a) provide capital
b) re-allocate capital from less efficient to more efficient co’s.
The autopilot style of investing is good as far as it goes, but it risks inflating the SP500 far beyond what is logical, while starving smaller but still great companies of capital.
For example: Gordon Ramsey has restaurants and TV shows and probably a product line or two. He makes a lot more money from that than just being a chef. This kind of shift requires a comfortability with risk that many don't have coupled with hard work AND luck.
The TL;DR is the "pay yourself first and make it so that 10% of your income goes into a mutual fund before you even see the money"(1) and reasonably stay out of debt and you'll likely be financially successful. The other point is that money is just a tool and tools can be useful (buying food, shelter, pleasure), but can also hurt you (debt, bankruptcy, etc).
In the book he even advises AGAINST real estate because of the PITA (pain in the ass) factor of having to deal with tenants and upkeep.
1. This is the 1980s and index funds weren't yet in the zeitgeist, but subsequent revisions address this.
own the means of production (or an indirect proxy, eg land).
> Neither is more important than the other.
I would say capital is a more important factor than labor, because the tax responsibilities for earnings from different factors are different. Income tax is a lot more than capital gains tax. It is an undeniable fact that our system places more value on growth from capital, than growth due to increased labor efficiency.
The particular person pushing that notion may have been biased, in part due to a brief that society is neatly dividable into workers and the means of production. Certain classes of workers are seen as expendable by "factory owners" who demonstrate this by paint the minimum allowed wage to these classes of employees.
https://web.archive.org/web/20231213153144/https://i.imgur.c...
https://www.bogleheads.org/wiki/Three-fund_portfolio
As 01HNNWZ0MV43FF mentions [1], you can just dump everything you can into VTI or VTSAX, and you'll be ahead of most people. If you're looking for something more, that will cost you time and money to research and manage exposure to (real estate, private equity, other asset classes beyond public securities, etc). Make as much as you can, invest as much as you can as efficiently as possible. That is what buys your time back.
(not investing advice, educational purposes only)
isn't this contradictory? these values fluctuate and someone could come along with a sorcerer's stone and render all gold valueless
https://en.wikipedia.org/wiki/Flevoland
Now, the UAE, on the other hand… https://en.wikipedia.org/wiki/Land_reclamation_in_the_United...
I'm not sure I understand the argument. But going with Vermont, the population is 647,000. THat's over 4 acres per person. That's quite a bit. Zoning, restricted access, hoarding, and inefficient markets contribute largely to land having inflated prices. A slightly more progressive government could absolutely change the entire outlook of the land market.
My random advice: Always try to increase income instead of reducing costs, as increasing income has infinite potential while reducing costs has very limited.
Time is truly the most valuable resource of one. But you fail to believe this.
N.B: Elon Musk strategy of using pre-existing assets as collateral for loans is a great strategy for millionaire-businessmen.
Be mindful that behaviors that once were useful may cease to be so and you should update them.
The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
1: the entrepreneurial myth: the myth that most people who start small businesses are entrepreneurs
2: the fatal assumption that an individual who understands the technical work of a business can successfully run a business that does that technical work
> Gerber draws the vital, often overlooked distinction between working on your business and working in your business.
https://www.amazon.com/Myth-Revisited-Small-Businesses-About...
On the other hand, I've only ever heard "Rich Dad, Poor Dad" recommended by other people in the selling-dreams game.
> He also tells of how he can back out of contracts by inserting a clause “subject to the approval of my partner”, where said partner was actually his cat. That is called “fraud”.
How can you take anyone seriously who does a thing like this?
This is how promises with anyone works. It's ultimately about trust and character.
Bingo. If you really want to screw someone in a deal, you probably can regardless of contract. But, do that enough times and no one will work with you.
Kiyosaki is basically just making stuff up.
(taken from the same paragraph about the cat)
"I make this absurd statement to illustrate how absurdly easy and simple the game is. So many people make things too difficult and take them too seriously."
In fact, any author who claims to tell how to become rich, but is still not filthy rich, is a scammer. Most of the content in these kind of books could be resumed in one or two pages, but that wouldn't sell.
But he is right about Dave Ramsey. Ramsey has a completely irrational perspective on debt, and often gives some very stupid advice on topics relating to it.
But if you follow Kiyosaki's rules, you could be in prison.
If you’re being crushed by debt, following Ramsey’s (frankly commonsense) advice would probably be beneficial. If you have any other situation, his advice is going to be harmful to you. Especially compared to the advice you would receive from a real financial advisor, which Ramsey isn’t (though I’m sure a lot of his followers would be surprised to learn that).
Providing people financial advice is regulated for a reason. The advice needs to be tailored to the person and their own circumstances. Ramsey never does this, he only has one script. If you happen to be a person who’s going to benefit from his approach (which I’m sure there’s a lot of people who would), then that’s good for you, but whether his advice is good or bad for any particular person is just up to chance.
This is very irresponsible, a very morally dubious way for somebody to make their money, and leads to him providing plenty of just objectively bad advice.
It's not an optimal strategy for people who can handle the abstraction of interest rates, inflation, etc., but if his followers could handle those concepts, and had the impulse control to back it up, they wouldn't be heavily in debt to begin with.
It's reasonable advice for the demographic that needs it, and in that sense it's fine.
The HN tech bro crowd, who knows enough, and has enough cash, to run Christmas Tree option calls, has no business following Ramsey's advice.
It's worthwhile to be aware of what's called the Reasonable Person standard. If you own a business it is worthwhile to be somewhat familiar with the corporation law in the jurisdiction the company is incorporated in. And it's always useful to have a lawyer you can ask some questions, if for no other reason than to have some chance of avoiding those expensive (in $$ and time) arguments before a judge. But I'm not a lawyer so don't ask me.
He also encourages people to attend finance seminars and get involved in network marketing.
The audience for most personal finance books are people with absolutely no experience with personal finance. People with no experience read a book, conclude that it is filled with expert advice, and then recommend it to others. You kick this off with things like an Oprah episode and the momentum carries itself.
Scams and low quality content are usually a strong indicator something used to be good, and attracted copy cats.
Yes, but keep reading...
That's a pretty broad statement to make, especially with the implication that the only way you can become rich is by basically committing borderline fraud.
If you want to get rich, spend less, save and invest more. Nothing about that is fraudulent, and many would argue you'd have a more fulfilling life in the process.
Spending less and investing isn't going to make you rich. It can certainly help, but it's definitely not going to get you rich unless you have a large amount to begin with in saving and investing.
Secondly, any of the "holier-than-thou" wealthy people that primarily just have good jobs seem to overlook the fact that they are enabled by an entire cadre of people stepping on others and committing those grey area border-line frauds. Much like how we overlook the sordid conditions in foreign countries to enjoy cheap (or expensive) products. It's extremely unlikely that there exists a major corporation that isn't exploiting loopholes, maintaining a legal team to skirt regulations, and engaging in practices that are legal but ultimately not beneficial to their customers.
It's not wrong to make a profit, but there's a level that's fair and reasonable and in many cases the profit margin is correlated to the morality of the provider. The willingness to harm others for profit is a necessary component to become rich in all but a very few edge cases.
Price is what you pay, value is what you get. If a contractor has a brand new truck, never hire them. Without fail the best work I have had done was by the businesses with the worst presentation. The shoddiest, felt like a scam, was always by the flashiest companies.
Advertising at its core is a way to create a falsely inflated sense of value to justify a higher price. The primary way to get rich is to prioritize profit over providing a fair value.
Even Doctors are provided with their high salaries only by an artificial limitation of supply and a variety of opaque exploitative practices.
So the first step was to see if there's any unethical ways at all.
We'd have other steps after that.
It's always possible to dig deep enough and find questionable moral things, in this case, it would be about the platform, how customers are reached etc.
But that's far from my point, it's not reasonable to expect someone to avoid all creations derived through profits.
It's that the overwhelming majority, 99.99% of people who become rich are directly engaging in these questionable practices or are very directly supported by those who do.
Even making the video game likely makes you dependant on Microsoft, Apple or Google and the ills of their rise, but I see that as far enough removed that yes the solo developer could be considered reasonably ethical.
But again, how often does it happen?
In the US there are 1.4 million people with a net worth of over 10 million. How many of them were solo developers with a non-exploitive products that didn't sell out to someone who made the product exploitive?
If by "rich" you mean "Elon Musk or Gates" then you may have a point.
The phrase 'normal decently paid' is doing a lot of work here. You absolutely will not 'get rich' on the median wage in almost any developed country, irrespective of your 'thrifty savings'. Given the rising cost of housing, and the increasing inaccessibility of home ownership, anything but an income well in excess of that accessible to a supermajority of people is unlikely to result in housing security, let alone wealth.
Without trying to antagonise, I do think this perspective arises from an ignorance of how much more hackernews tech people earn than is actually 'normal'. For example, here in Ireland the median wage is €45,537. In the US it's $63,795.
With luck, continual employment from graduation, no major health challenges or other unanticipated life events and marriage or long term partnership, it may be possible to one day own a home on these salaries. It's virtually impossible to be 'wealthy' or 'secure' in any usual sense of the word. Given the two recent recessions, and the changes in family composition very few people I know are in these circumstances. Most are renting in precarity.
There's no denying that more money helps, but looking at https://www.marketwatch.com/picks/heres-how-rich-you-need-to... shows it can be done at varying levels.
Again, if the median is $63k, that means half are below that; if you're at the median and you live below the median, you're saving money. 23% live below $35k, so if you make $63k and live like you make $35k, you should be able to save at least $10k a year or more.
Of course, choosing to spend your money on divorces and child support greatly hampers things (and those are choices, even if you feel it's the only reasonable one).
You're discounting tax. At least in Ireland, as a PAYE worker (employee) your take home would be 32,228. Given rent, food and bills, it is not remotely realistic to assume savings of that level. Still less save for a deposit or a house or apartment, climbing onto the property ladder. Can you live below your means, sure? Will this provide enough capital to meaningfully invest? On its own absolutely not.
It's much harder for me to guesstimate tax and expenses for the US, but I'd assume similar is true.
You're also assuming no children - which is a pretty grim, but realistic assessment given these income levels. At a median income level having children now actively puts you in poverty.
You start with the Earned Income Tax Credit - which basically takes your 0% federal rate and refunds even more to compensate and overtake social security tax.
Then you have ACA subsidies that eliminate healthcare costs (or greatly reduce it).
And then there's the Child Tax Credit - up to $2k per child. This one isn't refundable so you end up having some room.
All of this is just on the tax form - this does NOT count any of the other assistance available.
The surest way out of poverty in the USA - assuming someone is actively trying their best and not wasting anything, time, talent, treasure - is to be stably married and have some kids.
(All my comments are around the USA of course, I have no experience of Europe or Ireland in particular - but everyone online always assures me that Europe is a paradise compared to the complete hellscape that America is ;) - so I assume y'all doing pretty well. If not, come on over! We have some statue about it.)
Cursory search seems to indicate that ACA is still quite expensive for low earners - https://www.forbes.com/advisor/health-insurance/how-much-is-....
I really don't know what you're suggesting here... We're discussing the possibility of attaining wealth by saving / investing on a median income, and you simply haven't supported the assertion that that's possible or likely with anything you've posted.
Income inequality is larger, and social mobility lower in the US than at most points in history, and this is largely true for Europe too - https://en.wikipedia.org/wiki/Socioeconomic_mobility_in_the_....
As someone actually living on an income in this ball park, I can assure you that tax credits aren't money, they're just less tax debt. And that the concept of having kids on a low income would actually be terrifying.
But ... they are? Money is fungible; if you owe $1k in taxes and you get given $1k in cash, that's the same as if they just make your tax burden go away.
And it's clearly obvious that it can't cost $20k a year to raise a child, as many families are below that in income ("In 2022, there was a total of 7.4 million families living below the poverty line in the United States.") - if it costs $20k to raise a child, and there are 11.6 million kids in poverty in 2022, then the average poverty family has 1.5 kids, costing $30k a year - but the poverty line is between $23k-27k for a family of 3.5! So the kids cost more than total income, which is patently absurd.
Anyway, the whole point of it is - are you the lowest earner in the country? No? Then someone makes less than you and lives on it. If you mimic them, you will have something to save.
But people don't want to do that. They want to say "woe is me, everything is shit, might as well buy that burger" and continue as a debt-slave to the corporations.
As to the first, the benefits of children are somewhat financial, if you take advantage of them and you'll be too damn busy to spend any money on anything but. But the "stable marriage" part may be way more important.
Still... is it really rich? It's upper middle class. You want for nothing, financially. However, you're going to have to work about 50 times longer to start to get into the big boy's club. The gap between the middle class (even at the very upper end) and the truly rich, at this present time, is beyond human comprehension in that way. See you when you're 3000 years old. People who have that much money did not get there by working.
Most people consider rich to be about "twice what I earn/have" and it slides.
I think rich is much better looked at from the time perspective - if your time is yours and not unwillingly sold to others; you're rich. If your time is not your own and you have to sell most of it to live, you're not rich.
And yes, I would put anyone who can comfortably retire before social security kicks in (so, early retirement/FIRE) as at least rich-adjacent.
For the author.
Getting rich by selling books how to get rich.
[0] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
[1] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
Yes it’s a terribly written book, but that’s typically the case from non-professional writers who just have something to say.
My biggest takeaway is that “stay in school so you can get a good job” is not a great wealth creation strategy. You just compete with other highly qualified candidates for jobs that pay 20-30% more (See 20+ years at Boeing). Jobs like this also attract other risk averse people.
Don't get in debt, direct your cash flow as soon as possible to things that make you money, rather than buying Teslas and other stuff you don't need.
His whole point is that two people with same incomes and jobs, can be extremely different in wealth after a decade based on their habits and how they spend or invest money and the obvious fact thst it compounds.
And for most it would be impossible to afford a home without going to debt.
Some people, especially Dave Ramsey, take anti-debt sentiment way to far. Sometimes you just have to live in the system (and the USA encourages home ownership with subsidized mortgages via freddy and fannie as well as mortgage interest deductibility).
North American society also tends to look down on renting as bad financial move, which can have benefits of making you more highly mobile and it's easier to move (fun fact, Switzerland has a home ownership rate in the 30% range and the Swiss have most of their wealth in other often more liquid assets).
Now I can just do whatever projects around the house I want.
And also the apartment I bought has appraised 60% - 70% on value within last 6 years, which technically comes up to more than 5x my down payment.
Buying the apartment seems like one of the wisest things I have ever done.
So this is an anecdote, but it seems like it was a no-brainer decision to buy the apartment at those specific interest rates at the time.
Now this real estate is kind of forced leveraged investment on me, and the interest rate is still much lower than I would expect to make in returns.
But: In most markets, the month-to-month carrying costs of a mortgaged home can be larger than renting (mortgage, property taxes, maintenance, HOA fees, etc). Historically over the long term it can make more financial sense to rent and then invest that delta (though it's contingent on actually doing that and varies by market, etc).
In Canada where I live, a lot of people did what you did, but are now under water in both the carrying costs as well as their home values being less than the purchase price and outstanding mortgage balance as we entered a real estate correction. This means they're stuck and can never move (mortgages in most of Canada are recourse, so the bank can go after you if you walk away). A lot of people also became landlords and bought homes or condos (using the classic anti-renting trope "I'm going to have some sucker tenant pay my mortgage for me"), but are now cash-flow negative with the rents they can bring in, but also can't sell. Enter the softening job market and those people are in trouble. This is before the risk of a bad tenant or sudden maintenance event.
There's absolutely nothing wrong with owning a home or even real estate, but far too many people tie too high a percentage of their wealth into it as a single asset class and they don't understand that there are actual risks. The financial crisis exposed and took advantage of the expectations people have of it.
Rise early, work hard, strike oil.
Apparently when Bill Gates was asked what he read, he started with "well of course, Drucker" or something similar. It's harder to read, but the advice is actually useful!
He is dumb and unsophisticated
He doesn’t give technical advice
It didn’t take a genius to make money in real estate in 1980. You probably have dumb relatives who did it too. The character traits that helped most were optimism and tolerance for risk. Is this true today? I don’t know. Thinking about that question is more fruitful than assuming failure and seeking evidence to support that view.
Not so great when you're the one being taken advantage of now is it?
As a child, I read this book in a bookstore. Nothing else like this was available to me in the suburbs with parents who didn't have any business experience. The idea of doing anything other than just "getting a job" was totally foreign. The book opened my mind to the idea that you don't have to work for someone else your whole life and that you want to build appreciating assets.
Literally everything else in the book is fluff or flat out wrong. It's not a good book. But for a lot of people, it was also life changing because it broke through in a place and a time when little else was available.
In 2024, we don't need this book. There is so much content available online that is so much better. Someone would get more out of reading a random page of the bogleheads wiki than this entire book. But I wouldn't call the book a "fraud" and I wouldn't deny the amount of influence it had decades ago when it first came out.
The notion that children were a financial burden, while correct, didn't sit well with me.
Anyway, I've always read the title as "Rich Dad Poor Dad but most importantly Rich Robert Kiyosaki" because truly that to me was always the real goal behind writing this book.
I've made the financially sound decision to not buy any of his work and let others read it to me.
Recently, his videos have been going around where he encourages everyone to get into debt and calls everyday working people suckers. I can only imagine how many more people he's managed to swindle.
It's basically a salesperson/charlatan selling you their book in which they tell you some very obvious things potentially their far more expensive entrepreneurship course.
If you want the book summarized, here it is:
- take control of your finances and understand what taxes, stocks, futures, etc mean
and as for it being a fraud or not ... isn't the answer obvious already from its cover?
I don't think you should take someone who says that seriously for your financial planning.
These days, my BS detector goes haywire the second someone starts singing praises of self-help books. Finance gurus, spiritual know-it-alls (I'm looking at you, Eckhart Tolle), you name it. But the crown jewel of nonsense? "The Silva Mind Control Method." I'm still gobsmacked by how many folks bring it up as their life-changing bible, despite it being chock-full of pure insanity.
The good news? It seems like it's getting tougher for these wordsmiths to pull a fast one on people. Gone are the days when you could slap together a bunch of truisms, sprinkle in some tall tales, and watch the cash roll in.
But hey, it's not all doom and gloom. There are some self-help gems out there that actually deliver the goods. "Atomic Habits," "Thinking, Fast and Slow," and Malcolm Gladwell's "Outliers" spring to mind. These bad boys? They're the real deal.
At least on the principles - they are old now and laws change but the principles remain.
eg https://www.amazon.com/Turned-into-Million-Estate-Spare/dp/0...
Basic idea but tatty discounted rental property, fix it up, borrow against it, buy more.
There are so many bad ideas out there. You really have to be discerning. I don't really know what else to say but I'm glad I never expected an inheritance.
EDIT: I'm out of comments for today but they encourage leverage (specifically with mortgages) without really talking about how VAR works. I'm not sure if it came from the author or somewhere else but they have this really bizarre idea about how real estate markets work. The models he comes up with flat out don't sound like viable economies to me.
> the beating the market has taken for the past few weeks
Yeah I saw someone on Fediverse say the stock market was crashing too. I held through 2020 so... No this is really not a crash, I wouldn't even call it a beating. I have drastically slowed down my investments the last 4 years both because of COVID and because I'm saving cash for something special I want, but I'm planning to get back into regular contributions soon.
Don't buy stuff you don't really need and invest your money is really not a way to bankrupt.
This is just false. Rich Dad was guy called Richard Wassman Kimi.
There's an interview with his son here https://youtu.be/CRq6sjpo9iU
The bit about getting a mortgage on a rental property and charging enough rent to make the payments, pay the property taxes, pay some property manager to fix leaking pipes at 2am, and make a positive cash flow is a hoot. Just try that.
However, the economic environment tends to change to cancel out things like this, in the long run. Look at the recent adjustment in the yen carry trade - the one that was blamed for the stock market crash last week. Lots of rich trading firms were borrowing billions of dollars in yen, at low rates, lending the dollars at high rates, making a profit in yen. However, after many years of this, the price of yen adjusted 12% overnight and wiped out all the profits and then some, from the firms that were still doing it. They had to spend all their dollar profits to get enough yen to pay the loans back. (They could have continued the trade, but the movement spooked them as the yen's value wasn't as stable as they thought and further movements could cause even bigger losses)
In the mortgage/rental scenario, this correction happens when the housing market declines, due to governments no longer preventing the necessary new construction of dense housing complexes. A tipping point will eventually be reached where landleeches are exiting their positions to cut their losses, causing prices to decline further causing more losses to remaining landleeches, who exit their positions to cut them.
It reminds me of the way people use LLMs where people can't tell the difference between a good answer and good-answer-shaped nonsense. See this guy's attempt to replicate neetcode.io with an LLM and the neetcode creator's response. The LLM user seems to have fooled themselves into thinking their LLM output is a useful step on the way to recreating neetcode, when it is not: https://www.youtube.com/watch?v=U_cSLPv34xk
My takeaway from Rich Dad Poor Dad is think about ownership and value creation instead of working for wages. I religiously follow having my assets buy my luxuries.
Does the Four Agreements really need a book? - Be impeccable with your word - Do not take anything personally - Do not make assumptions - Always do your best
Poor Dad Rich Dad: - Save Money in assets that grow (spend time learning about the assets) - Live within your means - Don't spend your income on luxuries, spend some of your asset growth on luxuries - Try to be a business owner instead of a workers
"If Books Could Kill" also did a critique for those who prefer to listen to a podcast.
I found the book appealing as naive young person. Yet so little of its advice was within reach to me. And the house I bought was a modest net loss compared to rent I would've paid. It boils down to buy cheap real estate and antiques that will be desirable in the future. I.e. be born in the right place, right time, to not too poor people, and make lucky choices. Also financial fraud wherever you can get away with it.