Anyone can get rich … for a little while.
“It’s not about how much money you make,” Robert Kiyosaki writes in personal finance classic “Rich Dad Poor Dad.” “It’s about how much money you keep.”
Most of us learn how to make money — how to get a job and work hard — yet we don’t learn how to manage it, the important part.
“Money without financial intelligence is money soon gone,” states Kiyosaki.
Before you let this deter you, understand that you don’t need to be an expert, have an MBA, or even study personal finance books cover-to-cover to acquire financial intelligence.
In fact, you really only need to fully grasp one key concept, Kiyosaki writes: “You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know.”
It seems obvious, but Kiyosaki says many people get it wrong. “Most people struggle financially because they do not know the difference between an asset and a liability,” he writes. “An asset puts money in my pocket. A liability takes money out of my pocket.”
Assets are things like stocks, bonds, and intellectual property, while liabilities include mortgages, consumer loans, and credit cards.
“Rich people acquire assets,” Kiyosaki explains. “The poor and middle class acquire liabilities that they think are assets.”
Take a home, for example. At the end of the day, owning a home is expensive — mortgage payments, property taxes, and repairs take a bunch of money out of your pocket — and they don’t always go up in value, yet the masses commonly call their home an asset.
Rather than thinking of their home as an asset, Kiyosaki explains, rich people think of it as a liability.
“I am not saying don’t buy a house. What I am saying is that you should understand the difference between an asset and a liability,” he writes. “When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.”
The wealthiest people understand the distinction between an asset and a liability — and then grow their asset column and shrink their liability column. “The result is that the rich get richer!”” Kiyosaki explains.
“Once you understand the difference, concentrate your efforts on buying income-generating assets,” he encourages. “That’s the best way to get started on a path to becoming rich.”