Jun 10, 2006 04:34 PM
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(Updated May 15, 2011 01:40 PM)
'Tis the age of instant gratification. Spend now, pay later is the mantra on the lips of the Indian middle class, at least that section of it which has benefited from the IT boom. Very gratifying indeed, (excuse the irony) particularly when the DINK couples are still young and strong and fear nothing save God. But what about the distant tomorrow when you will no longer be the 20-plus jetsetting executive but a frail, bespectacled septuagenarian rocking the armchair? Boss, who's gonna pay for your lifetsyle, modest or otherwise, then, unless you can summon the energy to continue working unto death? That's the question that the writer Robert T Kiyosaki seeks to answer with this slim, easy read. Has he? Let's see.
The basic premise of the author is that our education system (American system is what he talks about, but same difference as far as India's concerned) does not equip us to deal with money wisely. In addition, the predominant mindset of the educated, salaried middle class parent is to despise money as evil and at the same time desire all the time for it. Basically, this approach to money takes you nowhere, he says, and you end up spending whatever you earn and more. For a while, this pattern brings happiness, as your house is loaded with more and more toys (read car, furniture and your mortgaged house itself). Then, when the time comes to put your kids through engineering, you take a look at the pass book and the creaselines appear wide on the forehead. Where do you go for the money? Finally, your kid gets a loan from the bank on the condition that he will repay it with interest once he starts working. So, your kid starts professional life with a credit balance and is forever climbing uphill to get back in black. And so, what is said of Indian farmers in economics textbooks begins to hold true for the salaried middle-class - you are born in debt and you die in debt.
How do you get out of this vicious cycle of debt - or what Kiyosaki calls the rat race? For that, read the book. It's not my business to summarise the advice given in the book. But yes, I can evaluate the advice given in terms of how financially sound it is. As a student of finance, I can safely say that Kiyosaki has put down very basic tenets of financial management in a lucid form that you can easily relate to.
After I read this book, my family had to shift residence. When we did, I convinced my parents to pay off the mortgage on the old home and desist from taking on another for the new home. This meant selling off a portion of our investments, but considering the returns generated by real estate in Mumbai, that is prudent. In the process, we have wiped off our liabilities, escaped both the stockmarket crash and the interest rate hike and are able to put more cash in the bank every month. This is but the first step to financial freedom, which is a long journey away. But this is where it starts. My point: Kiyosaki's advice is pragmatic, relevant and potentially life-changing.
However, there are some disconcerting points in the book many readers will take offence to. First of all, the labelling of the salaried teacher as the poor dad and the risk-taking businessman as the rich dad. Yeah, you don't want your kids to learn the ways of the real world so fast, right? Well, hide it away and give it to them when they are in college. But it's a hard reality we cannot run away from. The reason why we keep our salaried job is not that we are the direct descendants of Harishchandra. It's really because we do not have the guts to leave the comfortable security of the monthly pay cheque and enter the cruel world of business where you can be prince one day, pauper the next if you are not careful.
Second, Kiyosaki's definitions of Asset and liability and his conclusion that a home is not an asset, but a liability, is again something that would cause consternation, especially for those who do not come from a commerce background. Well, I have studied accounting and the logic offered by Kiyosaki does make sense to me, though it may not agree with the accounting theory that I have studied. In accounting, an asset that does not generate any returns is written off in its entirety over a period of time. In other words, its value for all practical purposes is zero. Likewise, a home which cannot recover the principal and interest repayments incurred by you to own it is not an asset. It has no, in fact negative, value. So, this is difficult to digest, eh? Do something about it - READ THE BOOK!!!!!
The third point is his brutal attack on the education system. Please remember, Kiyosaki does not recommend that people should be illiterate. He only condemns the approach of the system, which ends up teaching things to kids which may not help them to survive in later life. I, for one, certainly didn't learn anything about managing money in school or college. And I do not find the thought of wanting to learn financial management offending or greedy in the least. Money is the life blood of the modern world, like it or not. True, man must widen his perspective of the world by taking interest in arts and literature. But why not take the help of money in enabling yourself to spend more time in intellectual pursuits? Learning to handle money with a leash on your craving for it is right - bad-mouthing it and at the same time needing it badly for survival is wrong.
I think this book is still a little ahead of time as far as India is concerned, in the sense that there are not so many families yet who are in a spot of bother financially. But even if it ain't broke, fix it. Read this book with an open mind and allow it to change your outlook about money and - dare I say - life in general. No, this is not a free promotion of the book - it has sold enough, thank you. I sincerely want everybody to shed their inexplicable distrust of money and people who tell you what to do with it. Pick up this invaluable survival kit at your bookstore, read it, understand it, implement it and give me feedback. If you have already read it, would be glad if you share with me your thoughts about the book. Please leave your ratings and comments on this review.
