The First and Only Rule You Need to Know About Building Wealth

The first and only rule about wealth building is outlined in Robert Kiyosaki's famous book 'Rich Dad, Poor Dad.' The rule states that you need to know the difference between an asset and a liability, and invest in assets.

An asset is something that puts money into your pocket, while a liability takes money out of your pocket.

I do find this definition a little bit tricky however, because there are some items that break these rules but don't really qualify as an asset or liability based on this definition. For example, investing in gold does not put any money into your pocket, but it is certainly not a liability.

These more questionable items I call commodities, as they are valuable, yet they do not directly impact the money in your pocket every month!

Some examples could include:

▶ ASSETS

A cash flowing rental property
A dividend paying stock
Your financial education (because this directly impacts your pocket!)

▶ LIABILITIES

A car
A boat
Financial ignorance (this also will directly impact your pocket!)

▶ COMMODITIES

Bitcoin
Gold and silver
A non dividend paying stock
Your own home (contentious, I know) ➝ This doesn't mean you can't treat it like an asset! 😉


An extremely important distinction to make is that the poor and middle class buy luxuries first, while the rich buy luxuries last!

The rich make sure they have a firm financial foundation before spending large sums of money on things that will lose them money! (liabilities)

Understanding this concept really simplifies the money game. This is the sole reason why two people who come from the exact same backgrounds can be in totally different financial situations later in life!


Thanks for watching!

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MY FAVOURITE INVESTING BOOKS:

A Random Walk Down Wall Street by Burton Malkiel:

Rich Dad's Guide to Investing:

Rich Dad's Retire Young and Retire Rich:

Rich Dad Poor Dad:

Rich Dad's Cashflow Quadrant:

The Richest Man in Babylon:

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