Book Review- Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!

In this easy to read book the author outlines the differences in the financial decisions taken by the poor, middle class and the rich people. The rich people become richer by investing in assets. An asset is an investment which “puts money in your pocket”. That means that an asset is something which generates a positive cash flow. A liability is an investment which drains money out of your pocket and creates a negative cash flow. Against the contemporary belief, the author argues that the investment in the house you live is a liability and not an investment.  Individuals should strive to build assets so that the cash flowing in your pocket is equal to your expenses – that is to be financial independent. One can pay their bills by a steady income but cannot create wealth.  The author advices young couples to not invest all their money in a big expensive house, instead, concentrate on purchasing assets which will make them financially independent. The second point author emphasizes is to start your own business (work for yourself) and create a career ladder than climb a career ladder. Small businesses and corporations have enormous tax benefits. A short history of income taxes in United States is very interesting. The corporations spend first and then pay taxes, while the individuals must pay taxes beforehand. To conclude, the book provides commonsense financial and accounting advice for making sound decisions. A person not familiar with personal finance or just starting his/her career can find the book immensely useful. The author repeats many times that “make money work for you” instead of “work for money”.