Is "Rich Dad Poor Dad" a Fraud?(economistwritingeveryday.com)
economistwritingeveryday.com
Is "Rich Dad Poor Dad" a Fraud?
https://economistwritingeveryday.com/2024/02/13/is-rich-dad-poor-dad-a-fraud/
238 comments
You can distill all the advice this book has to offer into one sentence: Rather than succumb to lifestyle creep, direct your cashflow from your 9-to-5 towards other endeavors that can make you money. That's it. That's the book. There is no step-by-step guide on how to do this, just a narrative, anecdotes and a few examples mostly around real estate.
I'll add some unnecessary fluff:
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.
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.
That's the real takeaway from everything.
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).
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).
Delaying gratification or in simple terms, delaying fun is easier said than done.
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.
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.
Morgan Housel hits this nail on the head in "The Psychology of Money", by talking about these "touchy-feely" aspects of money (which are routinely tossed aside in quantitative analyses... because they're not quantifiable).
It really does come down to "we know what we have to do, but it's too f**ing hard and/or tedious".
It really does come down to "we know what we have to do, but it's too f**ing hard and/or tedious".
Yep, and it's why all the "tricks" to do it are basically how to build good habits (things like -track what you spend, spend 2% less each month).
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 it's also why everything seems to coincide; those who can maintain physical fitness often have the wherewithal to maintain financial fitness, etc.
> Delaying gratification or in simple terms, delaying fun is easier said than done.
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.
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.
If most people blindly invest in index funds the whole market ends up overvalued. And they kill competition as companies only aim to just stay in the index.
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.
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.
This is incorrect, if the real estate is your primary home.
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.
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.
You can invest savings in the market, but that ups your risk. Investing in a primary home is fine because you would pay rent otherwise, but look at rent to sell ratios for sure, you won’t always win owning a home if you are in a frothy market where rents are cheap and buying is expensive.
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.
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.
I've seen many videos by finance youtubers going over the classic "buy a home vs invest the savings" and the dumb mistake that all of them make is assuming that the rent price will stay the same across the entire time frame considered.
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.
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.
> I've seen many videos by finance youtubers going over the classic "buy a home vs invest the savings" and the dumb mistake that all of them make is assuming that the rent price will stay the same across the entire time frame considered.
> 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.
> 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.
I rented for 9 years in Beijing, paying $1k-$1.5k/month for apartments that were on the market for $1 million. It would have been dumb to buy in that context, an obvious bubble (rents are slightly stronger now, but vacancies are high). There are many bubble markets where you can nope right out of since the rents are probably cheap enough.
All of it depends on circumstances. The blanket advice is fairly useless.
Owning rental property is a small business. You can earn far more, reliably, without the whims of a number going up and down, than you can by passively investing it.
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.
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 believe you can do well with rentals, but not without labor and knowledge. The danger is people thinking they will just hire a manager.
I would also rather be an engineer than fix apartments.
I would also rather be an engineer than fix apartments.
It's crazy, I just call a contractor I trust and they fix it, and then charge enough rent to make sure it covers anticipated maintenance, and then have a business insurance policy to protect against big disasters.
Wow, I'm a genius!
Wow, I'm a genius!
Charging enough without leaving the property empty can be a challenge. As is finding tenants who won't trash the place so often you lose money on all the repairs and turn over.
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.
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.
In other words:
- 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
- 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
Sure, but you're managing the property. And that's great! Many get into RE thinking it's a set it and forget it type thing. That's not the case. But the work is pretty well understood and it can be done as a side gig, making it great for someone who wants to add to their income.
I know a number of people who have done very well with RE, but they all actively manage their properties.
I know a number of people who have done very well with RE, but they all actively manage their properties.
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Numbers go up and down for rental businesses all the time – up slowly as you collect rent, down quickly as you need to perform maintenance.
Right, no one should ever do anything! One calamity and you go bust. That's why no one ever can handle managing rental property, it's so dangerous /s
It's good, but it's work. I have a friend, really good swift/iPhone dev who charge 350 to 500€ an hour (so 200-350 after taxes). If after taxes and expenses (loan repayment) he can earn 2-3.5k for less than 10h of work per year that can be a good investment. But that's not taking into account the principal he invested, the fact that the job would bore him, the fact that he can't improve his skills.
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.
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.
I agree with much of this, but I do think that there is a flaw in his logic - he operates on the notion that saving more of your income has a two-fold impact on your ability to retire.
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).
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).
“ trips to places like disney world with the kids while staying in a nice hotel vs biking and camping”
Woahhh there, thinking camping is an inferior trip is wrong. Being cheaper isn’t inferior.
Woahhh there, thinking camping is an inferior trip is wrong. Being cheaper isn’t inferior.
In fairness I did not see a negative connotation to that writing. You're attaching a negative tone to that writing.
That's so true. I have hundreds, maybe thousand of memories linked to hiking and camping with my parents (we went on 'kayak hike', and everytime I sail or just visit around gersais/guenersay, the emerald coast, corsica or southern France I make a trip down memory lane.
I agree, for those that prefer biking and camping vs Disney world and hotels, then Mister Money Mustache’s advice rings true and seems logical. For those that have other ideas of what consists of a ‘good time’, then there is a limit to the ‘cost cutting’ that can be achieved.
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.
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.
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If you're comparing passively investing in VTSAX vs some REIT, I might agree with you. But generally, the fewer people between you and your capital being deployed, the higher the return.
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.
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.
You also have to be cool with knowing that your real estate gains are largely contingent on people being unable to afford a home to live in.
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.
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.
Lot's of people don't have the means, financial stability and minimum stay duration required to buy real estate.
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.
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.
I think you could make the same argument about the externalities of many of the components of the S&P 500 too. E.g. you also have to be cool with knowing that your ETF gains are largely contingent on the destruction of the natural environment, or the addicting of people to pharmaceuticals or social media, or…
It turns out our capitalist system associates very few returns to human flourishing!
It turns out our capitalist system associates very few returns to human flourishing!
Most markets don't have the stranglehold on supply like real estate does. Especially in populated markets.
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.
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.
It actually isn't - if you factor out the leverage.
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.
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.
RE is one of the only ways the 'average' person can get that sort of leverage and favorable tax treatment.
Could you explain your point in more details?
Sorry, I'm not super knowledgable about this topic.
Sorry, I'm not super knowledgable about this topic.
Calculate appreciation in a hot market area over time, and the returns aren't terribly exciting. Short periods of wild appreciation and decades of nothing.
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).
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).
It can be even more insane than that. Not knowing what I was doing, I bought a house during the sub-prime boom thing (2004). I paid $10k in fees (zero down) for a $400k house with an interest only mortgage because I was able to "finance" the %20 down payment as a home equity loan. Fun times! I remember paying about $1700/mo total in interest payments ($20k/year). I checked Zillow all the time and the house was "making" 50k a year in appreciation just sitting there so it was essentially free. I sold it after 3 years (dec 2007, good timing) and after all the fees I walked away with $130k in cash right before the housing market crash (tax free!). I didn't know what I was doing then either.
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 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.
"where you bought that $500k house ten years ago with $50k down, and sell today for $800k"
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.
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.
>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.
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.
>>- 20k/yr in interest isn't really 20k once one factors in the tax deduction on that money.
You get any tax deduction on your mortgage payments???
You get any tax deduction on your mortgage payments???
On the mortgage interest, yes (U.S.)
That's crazy. Wish that was a case here in UK.
It's no longer a factor for many (most?) in the USA because the standard deduction went so high.
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.)
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.)
As a beneficiary, it's nice, but overall I believe it's unfair that homeowners get a tax break, while renters do not.
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.
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.
> All that matters is the savings ratio. Everything else cancels out. I promise
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.
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.
No, it's correct. If you're currently not living on ramen noodles, then your SR will be lower. So ramen noodles are factored in
It's too simple because it's a point in time snapshot.
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.
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'd say in the UK the majority of rich people are so through owning real estate. It's kind of a time honoured thing. Not sure it's a good thing - probably it's one of the reasons for slow economic growth here that people sit on property rather than making stuff.
There’s also a survivor bias in real estate.
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.
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.
Yeah it has good times and bad times depending on the property market and the government laws of the day and also on the individual. Still over the long term there tends to be a transfer of wealth from the young and hard working to property owners as a class.
Also the monied class totally lost its appetite for manufacturing anything due to the unions that went with it, and the solution to the problem of socialism was to destroy the idea of society, as per Thatcherism.
If VTSAX was a free lunch, someone would’ve / is currently eating that too
VTSAX isn’t a free lunch, but you pay in risk rather than time spent managing real estate. It’s passive assuming you can handle drawdowns whereas real estate is passive assuming you think running a rental business is passive.
Truth -- running real rental businesses ain't easy. Renting out your former condo or something, a one-off, may not be hard, but it rapidly gets messy.
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.
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.
Saturday Morning Breakfast Cereal recently did a joke about this kinda.
https://www.smbc-comics.com/comic/conscience
I don’t believe in efficient markets. I’m saying that there’s a lot of people sending their money to the SP500 on autopilot. The value-add of investors are
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.
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.
VTSAX is broader than the SP500 though: https://investor.vanguard.com/investment-products/mutual-fun...
VTSAX: Vanguard Total Stock Market Index Fund Admiral Shares
[deleted]
Yep. Basically it just points out that rich people have passive income and this is better than just having a single normal job.
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.
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.
Pretty much this. In Canada, we have a book called the Wealthy Barber ( https://en.wikipedia.org/wiki/The_Wealthy_Barber ) that came out in the late 1980s that was a fictional story of a "rich barber giving financial advice to young people". It essentially lays the groundwork for compound interest working in your favour and gives sensible advice on life insurance, estate planning, etc.
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.
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.
If his advice actually for real, it could be distilled further:
own the means of production (or an indirect proxy, eg land).
own the means of production (or an indirect proxy, eg land).
in capitalism, the most important factor of production is capital.
There are two factors: capital (not money), and labor. E.g. the factory and the workers. Neither is more important than the other.
My intro economics course taught there are 4: land, labor, capital, and entrepreneurship.
> 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.
> 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.
> Neither is more important than the other.
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.
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.
Aye, the real trick there isn't in the book: getting some guy with more means of production than he - or any other human - could possibly exhaust in a lifetime to let you have any means of production of your own.
Is it even possible to have a step-by-step guide for something like this? outside of "invest in index funds" or other historically secure and boring investments everything else looks like a crap shoot.
https://en.wikipedia.org/wiki/The_Index_Card
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)
[1] https://news.ycombinator.com/item?id=41245973
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)
[1] https://news.ycombinator.com/item?id=41245973
personally the advice I follow is to buy actual metals like gold and silver (not invest in those, but physical authenticated metals). I can't guarantee it will gain or maintain value in the future, but i'd rather have a constant than an unknown loss. Anything else I put into S&P500 and forget it existed in the first place
> I can't guarantee it will gain or maintain value in the future, but i'd rather have a constant than an unknown loss
isn't this contradictory? these values fluctuate and someone could come along with a sorcerer's stone and render all gold valueless
isn't this contradictory? these values fluctuate and someone could come along with a sorcerer's stone and render all gold valueless
The risk of it getting stolen is too high for it to be attractive as an opion, IMHO.
Yeah until you need to move a significant amount of it, it gets heavy. My friend's dad does this but they don't ever plan to move. I think they also have it hidden around the home. Oh, also don't get robbed.
Eh. Everyone needs somewhere to live and the one thing in the world nobody's gotten good at making more of is land.
A lot of land is terribly utilized. I live in a ~10-storey building, on a ground footprint about half the size of a typical American suburban plot, in one apartment of three on this floor, in one room of the apartment with three. Given the irrational assumptions that everyone is a 1-person "household" ("roomhold"?) living with roommates, and some percentage live with their partners in the same room, this is 200 times more effective use of land.
Effective by what metric? Provoked mental illness in occupants? Blood cortisol ppm? I'd literally rather live in my car than the conditions you're describing.
Are you suggesting apartment buildings, which are a feature in every major city on the planet, contribute to mental illness? and that you'd prefer living in a car as opposed to a fairly standard place that millions of people live in?
I am absolutely suggesting that the rise in cramped rental accommodations contribute to mental illness. Fast food consumption has been thoroughly normalized too so I'm skeptical of the idea that because millions of people are doing it it's somehow perfectly fine.
That's exactly what they're suggesting. It's one of many right-wing talking points designed to keep the poor poor, with no basis in reality.
Through what mechanism does noting that cramped conditions are cramped and that generally causes issues enforce income inequality? Note renting is abdicating a major avenue of wealth generation to your landlord.
Through what mechanism do you find having 25m² to yourself and having use of a kitchen and bathroom cramped? Did you not grow up like that, or worse?
There's nothing right wing about this.
they do hate cities though
Do they? Where I live, right wing people live in cities and hate the subsidies to rural left wing farmers.
I've never even heard of a left wing farmer before, much less met one. They don't appear to be a thing on the east coast.
[deleted]
(Gestures at The Netherlands)
Bah, the Dutch haven’t created a new province for decades. Are they really getting better at making new land?
https://en.wikipedia.org/wiki/Flevoland
Now, the UAE, on the other hand… https://en.wikipedia.org/wiki/Land_reclamation_in_the_United...
https://en.wikipedia.org/wiki/Flevoland
Now, the UAE, on the other hand… https://en.wikipedia.org/wiki/Land_reclamation_in_the_United...
(Gestures at artificial islands in the South China Sea)
yawns in sea level rise
Land prices, however are heavily influenced by artificial scarcity. It's also something you are entirely reliant on the government to enable you to own and you can't under any circumstances transport.
Artificial scarcity? Who sold you that crock of shit? The state of Vermont is 2,615,376 acres in size and that number isn't subject to increase. Short of living in a bunker with a stash of bullion and a couple tons of crated toilet paper you aren't likely to find an investment strat that doesn't rely on some form of governmental oversight.
>The state of Vermont is 2,615,376 acres
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.
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.
They all say the same stuff essentially: avoid fast money hype & invest in slow, steady, low-risk vehicles.
So then you would have been missing out on the tech? And invest in bonds?
Tech is 30-40% of the S&P 500 so just investing in a index fund you would have exposure.
Yeah, but stocks is high risk.
A single stock is high risk, an index fund is very diversified, and while it does fluctuate with the market, overall the risk is very low on a long timeline.
I guess my point is that all of it's very relative, depends on your age, your circumstances, goals, geographical location and many other things.
My random advice: Always try to increase income instead of reducing costs, as increasing income has infinite potential while reducing costs has very limited.
My random advice: Always try to increase income instead of reducing costs, as increasing income has infinite potential while reducing costs has very limited.
It is far more feasible to learn to save than it is to earn more than 150’000$ a year for most people. Hell, in Europe, you are way above 90%, of you approach 100’000$.
Yeah that’s a great longer term strategy but cancelling Netflix and having dinner at home instead of Chili’s are actionable things you can do today that will put more money in your pocket.
Index funds seem to be the consensus in books like that, which would include tech stocks I'd imagine.
Yours is ridiculously bad advice, but typical for those who work to say. Even for person with no other sources of income, the optimal path is investing such that you will within reasonable amount of time be able to with "certainty" move "reinvest income from X" instead of slaving. But mathematically speaking, even very high income seems to not to be possible since to invest 10000€ year you'd need to have about 1M€ in dividens.
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.
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.
We can go even shorter:
Be mindful that behaviors that once were useful may cease to be so and you should update them.
Be mindful that behaviors that once were useful may cease to be so and you should update them.
And for contrast, here is another book from the early 2000s that, seems to have stood the test of time:
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...
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...
Yes, this one is actually good. It definitely helped me learn how to operate better as a self employed person.
On the other hand, I've only ever heard "Rich Dad, Poor Dad" recommended by other people in the selling-dreams game.
On the other hand, I've only ever heard "Rich Dad, Poor Dad" recommended by other people in the selling-dreams game.
That was the #1 thing that set me off against it decades before I found Reed's evisceration. The only people talking about it and promoting it were multi-level marketing scammers and adherents. Very cult. Much hype. Wow.
Very, very good book IMO. One of the few business books I've read that's absolutely worth reading.
I haven't read the book, but does it really say this?
> 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?
> 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?
It is the sort of advice people who will never be in those positions hear and think it must be part of how rich business people operate. It is basic knowledge porn, like Malcolm Gladwell books, but with less sophistry.
From what I've learned about how rich business people operate, they don't even tend to bother with contractual shenanigans like this; if they perceive that they have the upper hand in a situation, they'll just effectively say, "fuck you, I do whatever I want".
> they don't even tend to bother with contractual shenanigans like this; if they perceive that they have the upper hand in a situation, they'll just effectively say, "fuck you, I do whatever I want".
This is how promises with anyone works. It's ultimately about trust and character.
This is how promises with anyone works. It's ultimately about trust and character.
This is basically a restating of how high-level rich people deals work; the contracts might exist, but it's really all down to trust and a handshake. If you do screwy things, you may find nobody willing to deal with you at all, contracts or no.
> trust and a handshake
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.
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.
Yep, and it helps explain why you can have some rich guy complain about another rich guy who "screwed him over in a deal" for an hour, and then he casually mentions he has to go to lunch with him for a new deal. It's just business.
Malcolm Gladwell at least references actual studies -- there is a lot of hype and "science news reporting" BS in there, but there are at least kernels of ideas.
Kiyosaki is basically just making stuff up.
Kiyosaki is basically just making stuff up.
This is taken out of context, and the author of the blog post should keep reading:
(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."
(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."
The book had actual garbage advice, live repeatedly suggesting to invest in real state. In contrast to the sensible advice on savings and living below your means, this one was simply "become a real state speculator". When the real state bubble burst, probably a handful of its followers were in a position to make bank from it.
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.
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.
I also haven’t read the book, but I’ve seen some of his speaking. He tends to make a lot of incredibly oversimplified observations about basic debt instruments, and then acts as if they’re utterly profound insights. If an interviewer ever pushes him a little, he seems to just get defensive and kinda looks as though he doesn’t really know what he’s talking about. He’s certainly given me the impression that he’s just a conman that doesn’t have any more than a one-inch-deep understanding of any of the topics he loves to yap about.
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 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.
The key with Ramsey is if you follow his debt rules, you'll .... be ok? Maybe not mathematically as great as you could be, but ok?
But if you follow Kiyosaki's rules, you could be in prison.
But if you follow Kiyosaki's rules, you could be in prison.
To be clear, I think both of them are frauds (though one a lot more than the other).
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).
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).
I think Ramsey takes it too far, but then I think about his audience. I can gamble and drink alcohol without getting addicted. But for people who are addicted they usually need to completely stop. I see the same thing with those who are not able to manage their spending or debt. They need shock and extreme measures to get back to a good spot.
Ramsey isn’t even a real financial advisor, let alone a qualified psychologist…
He's an entertainer with a decently large following. There are worse things he could be telling people to do other than save money and get out of debt.
His entertainment is providing financial advice, which (while I'm sure he follows all the applicable laws) he's not qualified or licensed to provide. He's not necessarily a scammer, and I'm sure his advice is helpful for a lot of people, but he gives everybody the same advice, and for a lot of people it's very bad advice.
Genuinely curious what part you think is 'very bad'? Maybe it's not all optimal, but very bad doesn't seem like what he's pushing. Admittedly it's been a long time since I've listened to him, but I have a couple friends who followed his methods and are in much better financial shape now.
He’s incredibly averse the debt, which is just his ideological stance, and this leads him to provide very bad advice. You’re not that likely to go bankrupt following his advice (it’s not impossible, I’ve seen him advise some very questionable house sales), but you’re much more likely to turn 65 and realise you can’t afford to retire following his advice, than you are following advice from an actually qualified adviser. If you had some extra disposable income today, and some low fixed rate debt, Ramsey would advise you to pay it down, even though almost any other investment would be an obviously better choice.
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.
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.
Dave Ramsey's advice is sub-optimal, but he's aimed at people who can't handle money, and is telling them to focus on crushing their debt.
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 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.
IMO contracts are no different than a handshake anymore. They have so much fine print nobody, not even the judges you will spend a fortune arguing in front of, knows what anything means anymore.
It's somewhere in between those extremes. It's true that some things that go into a contract aren't actually valid because they infringe on rights or aren't within the authority of its parties. It's also true that some things are only valid if they're mentioned in the contract, because they might not be a typical part of doing business (e.g. things like fees or handling disagreements in arbitration hearings). It's also true that some things are implicitly in the agreement without being mentioned in the contract.
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 $$ and time) arguments before a judge. But I'm not a lawyer so don't ask me.
It's worthwhile to be aware of what's called the Reasonable Person standard. If you own a business it is worthwhile to be somewhat familiar with the corporation law in the jurisdiction the company is incorporated in. And it's always useful to have a lawyer you can ask some questions, if for no other reason than to have some chance of avoiding those expensive (in $$ and time) arguments before a judge. But I'm not a lawyer so don't ask me.
Yes. He really does say this.
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.
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.
His podcast was recommended to me by a colleague. I listened to a single episode and realized it's just the ramblings of a guy who made money with zero concrete advise on how to do it yourself. And of course tons of complaints about taxes and regulation.
And I think the book is the same in a way
Seminars were important knowledge distribution networks in the 80s and 90s.
Scams and low quality content are usually a strong indicator something used to be good, and attracted copy cats.
Scams and low quality content are usually a strong indicator something used to be good, and attracted copy cats.
> Yes. He really does say this.
Yes, but keep reading...
Yes, but keep reading...
Every currently rich person has done a million fraud-like-but-maybe-not-actually-fraudulent things like this and that's how they're rich, so it's not completely insane. You definitely don't get rich by staying within the white painted lines. This particular one is more on the insane side of the spectrum... but do you remember that Elon Musk had a large golden parachute contract at PayPal, meaning they had to pay him a lot of money if they let him go, and then he made really stupid decisions so they had to let him go, and give him a lot of money?
> Every currently rich person has done...
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.
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.
Marx-dogmatics are stuck in a dumb peasant mentality and think that making a profit is inherently fraudulent, and that everyone else should just break even.
Tell me you've never read Marx without telling me you've never read Marx.
But they truly are not wrong.
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.
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.
What if you make a solo video game that millions of people are willing to buy and play and become a millionaire through that?
Then you're an extremely rare exception, very lucky, and we shouldn't design society around everyone being like you.
Well the main point is that I'm trying to find the common ethical ground, at which point does someone become unethical with the money they made.
So the first step was to see if there's any unethical ways at all.
We'd have other steps after that.
So the first step was to see if there's any unethical ways at all.
We'd have other steps after that.
Yeah, that's reasonable. Assuming the game isn't exploitive or loaded with dark patterns and things like that. How often does that happen though?
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?
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?
While some wealthy individuals might employ unconventional tactics, it's crucial to distinguish between bold strategies and unethical behavior
This seems unwarranted. Even if many rich people grifted their way into that position (for whatever definition of 'rich' you prefer) some proportion will have ended up that way through a combination of skills and luck without actually acting immorally.
Is this true though? Leaving aside those with inherited wealth. If you imagine in purely competitive business situation, with poor enforcement of blue collar crime prosecution globally - seems likely the least ethical competitors would win out a supermajority of the time.
The most unethical competitors get investigated and „…find out” eventually. The money-optimal strategy is to only act badly when one can get away with it and stay under the radar. (The sanity-optimal strategy is to always act lawfully.)
It's entirely true because it's easy to prove that any normal decently paid occupation with thrifty savings will result in rich, at least by a normal standard.
If by "rich" you mean "Elon Musk or Gates" then you may have a point.
If by "rich" you mean "Elon Musk or Gates" then you may have a point.
"It's entirely true because it's easy to prove that any normal decently paid occupation with thrifty savings will result in rich, at least by a normal standard."
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.
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.
I have never earned terribly more than the median US salary and I have a house and a family. It's possible - if difficult.
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).
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).
> so if you make $63k and live like you make $35k, you should be able to save at least $10k a year or more.
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'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.
The USA actually has some of the most advantageous tax policy for low-wage earners (and those with children, even more) in the world. And by low-wage earners I mean anywhere from way below the poverty line to ... barely scraping by at $400k a year for some of them?
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.)
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.)
I'm genuinely curious - how could having children possibly be a way out of poverty? Unless you're making the assumption that they'll be in an economically better position than you and 'take care of you in your retirement', or similar? 2K per child per year isn't going to approach the cost of raising a child. Which seems to be closer to 20k per year - https://ifstudies.org/blog/the-true-cost-of-raising-a-child
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.
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.
> I can assure you that tax credits aren't money, they're just less tax debt
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.
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.
Sure, I could earn a few million that way. Is it rich? If a house goes for one million, and you have two million, you have the equivalent of two houses. You presumably only want one house, and if you're wise, you don't engage in the kind of thinking that might cause you to spend the rest on a Ferrari or a Rolex, so you have practically unlimited money left over for daily purchases. You're very comfortable. You're also 60 years old. Money rich, time poor.
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.
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.
To me, rich is 'not having to work anymore' - which is easily doable at $5m and very likely doable much lower than that, depending on where you are.
So, you can work your entire life and then not have to work any more i.e. retire. Rich is getting a retirement now??
Again, it depends on what you consider rich to be.
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.
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.
I know a dude with a 7th grade education who amassed millions via hard work and thrift. Don't think you have to play millionaire games to make millions. Mostly you just need to not overtly waste your income.
Supposing I worked for my whole life I could retire with a few millions. Then I'd be 60, and then eventually dead, having spent my whole life working for the actually rich people (who have 5 orders of magnitude more and didn't work for it) instead of doing things I wanted to do, in order to get them to give me a tiny fraction of their wealth. Is that good?
Depends on your motivations I suppose. Hopping on the Hedonic Treadmill is a sucker play though.
What if you make a solo video game that millions of people are willing to buy and play and become a millionaire through that?
What about a case where someone makes a SaaS app and sells it B2B, becomes millionaire through it?
The "If Books Could Kill" podcast discusses this book and others in the same genre. The two hosts are reasonably thorough in their research, and quite amusing as well.
Thanks for the recommendation. I often get books recommended that I think could've been an article or where I doubt the science behind it. This sounds incredibly interesting!
Excellent recommendation. I'm always impressed by how thorough and fair the hosts are. In their recent episode on "The Anxious Generation" it honestly feels like they did more research than Jonathan Haidt did when he was writing it.
Love the podcast. It’s worth a listen.
"Get Rich" books have frequently worked throughout history.
For the author.
For the author.
+100 to this. There's no better successful enterprise than becoming a guru - assuming you have the personality to pull it off.
Reading your comment I immediately think about this personality: https://en.m.wikipedia.org/wiki/Bodo_Sch%C3%A4fer
Getting rich by selling books how to get rich.
Getting rich by selling books how to get rich.
It’s stupid and funny and sad, all at once
One thing not mentioned in the article: People may be wondering how this book became so popular, basically it's because it became intimately tied to the MLM movement, Amway specifically but it did spread beyond that. People at the top of the pyramids would buy thousands of copies to send down their "downline" as part of a motivational tool. The primary goal of someone near the top of an MLM is to convince everyone down the line that you are ripping off that it's their fault for not hustling hard enough, and this book was and is one of the popular ways of doing that.
John T. Reed, an actual real estate guru, has been targeting Kiyosaki for decades.[0] Reed graduated from West Point and Harvard Business School, and he was so early into the real estate investing wave that he debated Robert G. Allen (No Money Down) on 60 Minutes in the 1970s. No one can ever find any of Kiyosaki's investment properties. And check out his opinions of dozens of other real estate gurus on his web site.[1] He does respect a few, but they are few and far between.
[0] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
[1] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
[0] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
[1] https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...
I've done alright for myself investing and owning a small business. I read this book years ago and I found it gimmicky. It's chapters and chapters of clickbait-y cliffhangers and parables that just never pay off with anything concrete. I recognized a lot of the rhetorical maneuvers from MLMs and "filler sermons" I grew up around. And the most financially illiterate people I know swear by it as an infallible text.
If Kiyosaki's rhetoric sounds MLM-like, it's because he's made fistfuls of cash as a spokesman/motivator for the MLM movement, Amway specifically. The MLMs love these motivational speakers because they help keep people in the program buying product, even when they otherwise would have wised up and left. And it gives the higher-ups plenty of "training materials" (books, tapes, etc.) they can sell to their downline (which is how the real money gets made).
He already has stated publicly that the “rich dad” is a characterization. And the book is about the 4th product in his attempt to teach finance courses. So I’m already suspect of the article.
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.
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.
Kiyosaki is absolutely a charlatan, I thought we all learned that in 2010?
While a charlatan, something I agree on, his points are solid.
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.
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.
Wouldn't interest rate matter for debt?
And for most it would be impossible to afford a home without going to debt.
And for most it would be impossible to afford a home without going to debt.
There's different kinds of debt. Many argue "good" debt is debt spent on assets that appreciate or provide income. However, people often forget that it's not guaranteed (see 2008). Some also only measure net debt (the leftover debt minus asset value).
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).
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).
My problem with renting is that it doesn't feel like I truly have a home. I bought an apartment and then a house, because house I can do whatever I want with. Otherwise I would never feel like I was at home or free to do something. I would always be reporting to the apartment owner, house owner.
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.
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.
Yeah, I want to stress I'm not saying people shouldn't ever buy, but it's contingent on the circumstances and it's often overlooked that renting can make practical and financial sense. If you're going to settle down in a desirable area and not move for awhile, the benefits of buying make sense.
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.
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.
To quote someone actually successful:
Rise early, work hard, strike oil.
Rise early, work hard, strike oil.
If you want a book that will actually change how you think about money and leverage, I recommend Peter Drucker "The Effective Executive". The first chapter alone is gold.
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!
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!
Most criticism in this thread can be summarized as:
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.
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.
Yes and also 4 hour work week
I found it very amusing that Tim got burnt out because people got into the habit of tricking him into a lunch by claiming that he would be joined by someone important, who of course didn't show up. A tactic that Tim himself popularized.
Not so great when you're the one being taken advantage of now is it?
Not so great when you're the one being taken advantage of now is it?
I got my hands on the translated book and original computer game. As very first book about wealth management for poor people it’s fine. I wouldn’t use it blindly as an investment manual. Obviously I learned that wealth generating assets are better than consumed money. I inherited some money, bought an apartment. Its value skyrocketed and I had a down payment for a house. I didn’t had this option if I consumed the money buying fancy car back then. So yeah, the book and the philosophy helped me a lot. I don’t own endless wealth as a rich dad did though.
It's a very terrible book BUT it was also super important, influential book at the time it was published. It can be both!
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.
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.
My friends in college bought Cashflow: the board game so I had a chance to play it.
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.
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.
I read the book on someone's recommendation, but I won't be doing the same to anyone else. The only person that book helped get rich is the author.
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.
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.
If you're looking for motivational insights and a change in mindset about money, it can be valuable I think.
Yes.
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
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
You can't imagine how frustrated I get when week after week, month after month, I see his book on the "top sellers" of all the major bookstores in my country.
I don’t remember any specific advice from the book. My takeaway was that rich and poor have different mindsets and motivations which account for the difference in outcomes.
Every how to get rich/successful book is a waste of time to read in my opinion. Go read a book that teaches you something valuable (to assist you in making money).
never read the book nor am I interested to do so but I have to say this must be one of the most mentioned books ever next to the bible. it's like reality set out to find reasons to confront me with it in random places consistently about once every two months for at least 10 years by now.
and as for it being a fraud or not ... isn't the answer obvious already from its cover?
and as for it being a fraud or not ... isn't the answer obvious already from its cover?
On another note the author of the book, Robert Kiyosaki, has also been a rampant promoter of Bitcoin. Just recently he predicted the price of one Bitcoin to be 10 million USD soon:
https://www.nasdaq.com/articles/robert-kiyosaki-predicts-10-...
I don't think you should take someone who says that seriously for your financial planning.
I don't think you should take someone who says that seriously for your financial planning.
Also,… avoid this like the plague and read “IF YOU CAN” instead by the great Bill Bernstein. Thank me later.
the advice is all shit but the meta-game isn’t - writing pop advice books actually is lucrative, especially back then. It’s just that you have to pretend you’re doing something else, which in his case was some nonsense about residential property.
You don’t think he made a lot of money in real estate?
Dunno. I don’t think his real estate advice in the book was good.
Idk if it was very technical for him to succeed. Know your local market and be aggressive in buying is a good strategy throughout 80s and 90s.
That’s what the article suggests: “there’s no evidence that Kiyosaki actually made significant money by real estate dealings, prior to making millions of dollars with his book sales (and presumably putting some of that into real estate.)”
Picture this: Teenage me, eyeing a self-help book my old man brought home. I was skeptical, sure, but still green enough to think, "Hey, it's a bestseller. Gotta be some good stuff in there, right?" Fast forward 20 years, and boy, have things changed.
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.
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.
What is a good alternative book along the same lines?
The "How I Turned $1,000 into Five Million in Real Estate in My Spare Time"
by William Nickerson books are good on US real estate.
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.
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.
Morgan Housel's books are pretty good I'd say.
I haven't read his book but I've watched my parents try to follow his ideas and I'm worried they're going to bankrupt themselves. They're not dumb, my dad has a much more successful career as an SWE than I've had (at least so far) but he's never been great with investing his money.
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.
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 advice out there is all over the place. I use the Warren Buffet advice. 'if I cant understand it I dont do it'. The problem is many people fall into the trap of 'i am smart at XYZ so therefore I am smart'. For me excel has save me many times from doing some really dumb things. Just put the numbers in. Do a 'everything is good' role and 'everything is bad' many times you will be surprised on how those numbers pop out. After the beating the market has taken for the past few weeks I bet there are many people who are now at 'margin call' having borrowed against assets that no longer exist.
I've been happy with my "get rich slow" scheme on stock indexes the last 7-ish years.
> 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.
> 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.
What bad ideas are in the book that could bankrupt your parents?
Don't buy stuff you don't really need and invest your money is really not a way to bankrupt.
Don't buy stuff you don't really need and invest your money is really not a way to bankrupt.
'Invest your money' is a great way to go bankrupt, if you choose bad investments.
>As best anybody can tell, there never was this “rich dad” character as described by Kiyosaki.
This is just false. Rich Dad was guy called Richard Wassman Kimi.
There's an interview with his son here https://youtu.be/CRq6sjpo9iU
This is just false. Rich Dad was guy called Richard Wassman Kimi.
There's an interview with his son here https://youtu.be/CRq6sjpo9iU
This was one of the most frustrating books I ever read when I was young. A bunch of people around me kept talking about how they quit their jobs and found success after reading the book, how it had changed their lives. I'd ready it and come out with nothing. I couldn't figure out what I was missing and just thought I must be dumb. It wasn't until I learnt the trick: becoming successful by selling advice about how to become successful that I stopped worrying about it. This silliness is obvious now, but I was barely 20 back then.
Yes. Saved you a clock.
Yeah, I call it "Real Dad, Fake Dad". Kiyosaki is also very much a part of the MLM motivational complex. Not to be trusted.
I think it is pretty well known that "Rich Dad Poor Dad" is a self help /motivational speaker type book, that is to say it is mostly drivel. Is it fraud? As much as any of those books, seminars, products are.
It’s so insulting low effort BS that it’s almost sneering. I really don’t understand the phenomenon. I’ve had people earnestly recommend it to me as an “amazing book”. Is it the catchy name? (This is my strongest theory).
Here's a food for thought. Many people aren't that well read or critical thinkers, they just lap up anything served to them in a book. If many people are recommending something, consider it passing through your well-hardened filters/firewall.
It scratches the same itch as Amway. It legitimizes the economic system for some people who want to believe there is a special path to riches for them.
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.
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.
It may have worked when the book was written. The evidence for this would be all the profitable landleeches around us who successfully get rich for doing very little. The people who followed this advice are the reason why housing prices are so high and the advice no longer works because they are so high.
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.
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.
Yeah I never totally got how anyone ever thought that shit was possible. I will say though that having rental property that you own outright is fantastic. Depreciation by itself is unbelievable. I'll make more than the initial purchase price of the property just in tax refunds.
Right. If you have the blue collar skills to maintain your apartment and the pink collar skills to manage the tenant relationships yourself it can be a great business. My brother-in-law owns a number of apartments close to where he lives and he does great.
The human mind cannot tell between acquiring new mind-expanding knowledge and acquiring mind-expanding-knowledge-shaped nonsense. We use heuristics to evaluate the quality of input and heuristics can be fooled by adversarial agents. Because the mind can't tell the difference it gives the same pleasure response to both, but the nonsense is much easier to create and wins the race to the bottom.
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
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
I like the book's message much like I enjoyed The Four Agreements; however, they both could have been a magazine articles instead of books.
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.
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.
Hey hey, no way does it deserve to be put in the same class as the four agreements. That’s legit.
They're the same as in there the good takeaways could be written in an article.
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
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
TLDR: yes
"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.
"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.