“If you’re going to learn to use debt, you’d better take some education.”
In a recent interview with Vanity Fair, his ex-wife and business partner Kim Kiyosaki said the debt figure has been misunderstood.
She explained that the total debt amount is held by a group of real estate partners.
“We have a lot of apartment houses with our partners,” she told the magazine.
“So technically, yes, we have all this debt,” but she said it’s attached to the assets and Kiyosaki’s personal share is, according to his ex-wife, small.
Kiyosaki told Vanity Fair he has an annual income of about $3 million.
“Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!” has sold more than 44 million copies worldwide.
According to his ex-wife and business partner, “he loves to say things that shock” and knew the number would turn heads. His philosophy is that your debt amount is irrelevant as long as banks remain willing to lend you money.
According to the Vanity Fair profile, the massive debt is strategic: as the value of his properties increase, Kiyosaki borrows more money against the increased equity and then treats the loan proceeds as tax-free income.
He also explained that he puts individual investments into separate limited liability companies (LLCs), which keeps them separate from one another and insulated in case one gets in trouble.
“Firewalls – that’s the way the rich play the game,” he said.
Donald Trump and Robert Kiyosaki attend the launch of Why We Want You to Be Rich: Two Men-One Message at Trump Tower on October 12, 2006 in New York City. Photo / Getty Images
While his strategy is used by other investors, particularly in the real estate world, some experts advise strongly against it.
John Poole, founder of consulting company JPTD Partners in Arizona, told the New York Post “there’s good debt and there’s bad debt, and then there’s $1.2 billion of debt, which you better know exactly what in the world you’re doing”.
“Leverage works beautifully on the way up, and if it’s not continuing on that way up, then it’s like a chainsaw financially coming down,” Poole added, explaining that, eventually, there’ll always be a payday and people need to be prepared for it.
“[Kiyosaki] may call this the ‘Rich Dad debt,’ but for the average investor, it could turn out to be ‘Poor Dad bankruptcy’ really quickly.”
Kiyosaki’s book, Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!, was published in 1997 and has sold more than 44 million copies worldwide.
The personal finance guru has also authored two books with Donald Trump: Why We Want You to Be Rich and Midas Touch.
Sign up to Herald Premium Editor’s Picks, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week’s best features, interviews and investigations. Sign up for Herald Premium here.