Friday Finance: BAD money books

I previously listed some good books for those wanting to learn more about finance.

There are some I don’t generally recommend, not because they’re bad but because they are unsuitable for my target audience. Essays by Warren Buffett, that sort of thing. There are a small minority of investors who are able to do better than the index by picking their owns stocks, speculating on currencies and that sort of thing, and there are good books available on these topics.

However, as I showed in my book, research repeatedly demonstrates that these are losing strategies for the average person. My book is aimed at total beginners who should probably stay away from such advanced strategies. The kind of people who might pull them off are the kind of people who would not have read my book in the first place it is far too basic for their needs.

There is another kind of book that is no good for anyone. It is aimed at the novice, not the advanced investor, and focuses on feel-good, get-rich-quick nonsense rather than concrete advice on how to save and invest.

The most well-known of these bad books is Rich Dad, Poor Dad by Robert Kiyosaki.

As with anything that is shit, there’s some good in it. Kiyosaki explains the difference between assets and liabilities, the importance of investing, that sort of thing. The book is highly entertaining and leaves you feeling that you’ve learned some esoteric secrets that will form shortcuts to riches and happiness.

This feeling is an illusion.

The book gets key things wrong. It leaves the naive reader with the sensation that he’s had an epiphany when in fact he’s probably not going to take any practical action to improve his financial situation, and if he does he’s likely to fuck it up.

Rich Dad, Poor Dad says too little about the absolute essentials of personal finance: avoiding debt, making a budget to ensure you spend less than you earn, setting up an emergency fund, paying off debt as quickly as possible, getting insurance if necessary, trying to increase income, learning the basics of investing, getting good advice and reviewing investments regularly.

In other words, all ten steps explained in my book.

In fact, Kiyosaki disparages the idea of increasing income through additional work. This is the big mistake in his book: he claims that the nine-to-five is for wage slaves and will never get you anywhere. The path to wealth, he whispers, is through clever investments and building your own businesses.

There are several problems with this.

First, working an ordinary job is an excellent way of making money to pay your debts and then start making investments. Most people who enjoy a high level of financial freedom have trodden this dull path: they’ve worked hard, saved their pennies and invested over the long run.

Second, being a businessman is not suitable for most people. Some have the knack and should certainly give it a go. Even then, many people running small businesses are not fantastically rich and they can work insane hours. Being self-employed sounds like money for nothing but you’re always working for someone. Nothing in life comes easy.

Third, some of the business ideas he suggests are highly risky and possibly illegal. Flipping houses, for example, carries with it a level of risk unsuitable for the average person and he fails to explain this. Same with margin loans for buying shares, which I specifically warn most people against. On one occasion he advocates a strategy that sounds a hell of a lot like insider trading, in my inexpert opinion.

No

Fourth, Kiyosaki is very vague about how to go about investing and how to become a canny businessman instead of an office monkey. It sounds good but there’s little of substance to stick your teeth into. One finishes the book, thinks, ‘Whoopee, that opened my eyes, I can’t wait to . . . ‘, and then realizes that the book didn’t say what to do.

It’s in the vibe, man.

Rich Dad, Poor Dad contains little actionable advice that you can use to improve your finances. It is mostly selling feelz. This, it does well. I enjoyed the book when I read it many years ago. The anecdotes from his childhood are obviously fake; the two ‘dads’ seem highly exaggerated. One of them is probably invented. However, it hardly seems fair to accuse Kiyosaki of lying because the work comes across, at least to me, as pretty much a work of fiction – and not a bad one at that.

It appears that Kiyosaki made most of his fortune through the success of this book, not through the vague philosophy and strategies advocated within it.

I’m picking on Rich Dad, Poor Dad because it’s so popular, but there are plenty of other books like it. There are also dubious seminars, YouTube videos and other platforms where you can pick up terrible advice and risk all your money if you’re silly enough to try it out.

As I say in Poor Man’s Guide, the trick to differentiating good and bad advice is how it makes you feel. The bad advice makes you feel fantastic, like you’re on the cusp of making millions and putting all your money worries behind you through a few patented strategies.

Good advice, on the other hand, is dull, dry and makes you feel like shit. ‘What, I have to cut up my credit card? I can’t buy meme stocks until I’ve paid off my car loan? I should invest in boring old index funds? Grrrr, that Japanese guy’s purple book was so much more fun!’

Welcome to the real world. There are no magical tricks or secret strategies for reaching financial freedom. A few people strike it lucky with a clever business idea – like writing a wildly popular and totally useless book – but for the rest of us, there’s nothing for it but to slog through the Ten Boring Steps:

  1. Don’t get into (more) debt
  2. Make a frugal budget
  3. Save an emergency fund
  4. Get out of debt
  5. Increase income
  6. Protect what you’ve got
  7. Plan your life
  8. Invest wisely
  9. Get advice
  10. Record and reevaluate

Yawn, huh? But that’s how you do it.

If these ten steps are too basic for you and you’re already way ahead, my book is not suitable for you. Buy it as a gift for someone less advanced.

If some of this is news to you, you need my book. It’s only five bucks. If you’re young, it may make you hundreds of thousand of dollars richer in the long run . . . but that’s a long way off and not exciting at all.

No feelz from my book I’m afraid, only solid steps to get you to where you want to be.

Also available on many other platforms.

4 comments

  1. luisman · December 3

    Reblogged this on Nicht-Linke Blogs.

    Like

  2. luisman · December 3

    I never read “Rich dad, poor dad” but listened to a few of his Youtube blabberings. That’s why I didn’t want to read it.

    But you just described why your book is worth reading, and as soon as possible after you are able to make any money. I enjoyed reading and reviewing it and giving a few remarks.

    Liked by 2 people

  3. Kentucky Gent · December 4

    SOMEONE had to write a boring book for novices, about slogging your way to financial independence.

    Might as well be you, right?

    Liked by 1 person

  4. Bardelys the Magnificent · December 4

    Eh, RDPD serves a purpose. It’s a children’s book for investing. If you barely know how the stock market works, it will do you some good. Should be read by the time you’re in high school, though. We all graduate some day.

    Like

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