I just finished reading “Rich Dad, Poor Dad” by Robert Kiyosaki and thought that this is an appropriate subject for anyone thinking about assisted living, aging and retirement. First, I will say that the book has tons of clichés and is mostly a rehashing of other “get rich quick” books. It does however have several real gems of wisdom. I have read lots of business books, investment books and other wealth building books so I was pleasantly surprised to find 2 critical point that have been widely overlooked financial literature. These 2 factors are so key that everyone should understand them but few people including many accountant that make a living advising businesses don’t fully grasp. I will save you some time reading the book by reviewing them here.

Assets versus Liabilities

Every time you spend your money, you can choose to buy an asset or a liability. Most everybody chooses to buy liabilities. The mass marketers work hard to make you want liabilities. Cars, big screen TVs, boats, and anything from the Sharper Image store is a liability. . You spend your money to get it, then you spend more to maintain it and it never produces any financial benefit. You can’t sell these items for anywhere near what you paid for them so they have little if any asset value.

In fact, for many people, their home is a more of a liability than asset. People are constantly piling more money (that could be invested) into their homes with upgrades. Since they will always need a place to live and the upgrades spoil them, they can never sell their home to recoup this investment.

The more liabilities you own, the less likely you are to be able retire comfortably. People that retire comfortably lead a simple life with a less than average number of liabilities. If you want to lead a good life-style when you retire, buy more assets and fewer liabilities.

Passive Income

The rich get richer because they focus on building their passive income and not their salary. Retirement plans are a thing of the past so building your salary income usually does not help you get closer to a great retirement. For most people, a salary increase is immediately follow by standard of living increase that offset the salary increase and puts more pressure on the worker to keep producing so they can maintain their new standard of living. You get a pay raise and you buy a new car that puts you even deeper in debt.

The rich focus on Passive income, not pay raises. Passive income continues to produce revenues even if you are sick, laid off or just playing lot of golf.

If you focus on paying-off your high interest debt and then investing in passive income producing assets like rental properties, web sites, and dividend stock, eventually you can live off you passive income and you are set for retirement. This might happen a 50 or might happen at 72 but the sooner you start, the better. If you want to have a comfortable retirement, start building your passive income now!

That my interpretation of the secret behind the book: “Rich Dad, Poor Dad”. Don’t let the mass marketing culture steal your retirement by tricking you into spending every penny on junk (money sucking liabilities). Think like the rich and buy passive-income producing assets and someday you will be independent of your paycheck and ready for a fantastic retirement.