Know the Difference Between an Asset and a Liability

Rule One. 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 is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an asset and a liability. "Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets"

An excerpt from the book Rich Dad Poor Dad by Robert Kiyosaki

This is I guess the very important lesson that I learned from the book Rich Dad Poor Dad.

What are assets and liabilities?

Assets, according to Robert Kiyosaki, are those that put money in your pocket while a liability takes out money from your pocket. This is easier to understand than the definition you found in the dictionaries. It's plain, simple and easy to understand by anyone.

When I want to become wealthy, I have to lessen my liabilities in order for me to be able to buy assets in the future. Since I am an employee, what I can do is to lessen my expenses by buying only the things that I really need and save the rest. Sounds simple but when you actually do it, it's really hard.

Growing up in a poor family, I don't have much trouble practicing this. We have been taught by my parents to buy only the things that we need and save the rest. This is easy when you really don't have money to spend. But when you're working and having a monthly salary, the situation is different.

This is where the trouble comes in for me. I used to buy the things that I didn't have when I was younger, to eat the food I wasn't able to eat, and go to places where I could go. I also have to send money home for my siblings so normally I was left with none and so I was so very eagerly waiting for the next paycheck.

When I read the book Rich Dad Poor Dad, I was enlightened. I analyzed my spending habits and realized there's something wrong with the way I spend my money. 

So I began to apply rule number one. It's very hard at first when you have many things you wanted to buy but can't. And sometimes I am tempted to use my savings and succeed. I then reason out to myself that I really need it. Think about fooling yourself. (^_^)

Over time, saving becomes easy for me though there are still times when I failed but I tried very hard to go back with rule number one. 

So I have been saving for sometime. There are times when I become frustrated because I have to take out my savings because my family needs it. But then, I have to help them. So I just continue saving. When my savings is enough I plan to build my own business.(^_^)

Rich Dad Poor Dad

I grew up from a poor family. I grew up in the farm and all I know is that people plant vegetables, sell it into the market and then you have money. If the price is not good then perhaps it's not your lucky day.


That's the life I came to know. But early on I dreamt of having a good house, a nice car so that we won't have to hitch every time we need a ride, a nice bed and lots and lots of food on the table. I secretly envy my classmates before because their houses were built near our school, unlike me who have to hike for one hour just to get to school, and their houses are also beautiful. 

Every Sunday when we go to town to buy our groceries, they would invite us for lunch. I remember feeling so small and dirty because our feet are usually either muddy or dusty and I feel pity for myself and my parents.


Paradigm Shift

When I was younger, I somehow learned that becoming rich is not a good idea. The idea that money is evil or that rich people are evil because they are usually corrupted by money made me to have second thoughts about dreaming to become financially free one day.

http://www.millionaireacts.com

So I just content myself in daydreaming about the good things in life that other people have and to envy my classmates for having their needs and even their wants being provided by their parents.


After graduation, my plan is to get a good job, have a family and help my siblings. But I was blessed because I came to know about Robert Kiyosaki and his book Rich Dad Poor Dad. My original plan was revised. 

Instead of just getting a good job to support my family, I added 'get a good job and slowly build my portfolio'. (^_^)