The Most Important Rule to Know to Become Rich

Oct 12, 2021 6:51 am

Robert Kiyosaki, author of Rich Dad Poor Dad, emphasizes on the importance of financial literacy without which even the rich will end up broke. It’s sad however this Sports Illustrated article reports that 78% of NFL players and 60% of NBA players face serious financial hardships after retirement due to poor financial decisions.

Kiyosaki stresses in his book the most important difference between his Rich Dad and Poor Dad. His rich dad bought assets and lowered his expenses by staying away from liabilities, while his Poor Dad struggled on a weekly basis of paying bills (liabilities) and never having enough to build his assets.

Rule 1

You must know the difference between an asset and liability and buy assets.

Rich people acquire assets whereas poor and middle class people acquire liabilities which they think are assets.
Assets result in making money and making us rich.
Students leave school without acquiring financial skills. So they are concerned about their professional success and not about their financial stability. They fail to understand that spending the money you have is not the way of life and this is caused by lack of financial literacy.

Why do the rich keep getting richer?

The asset column generates more than enough income to cover expenses, with the balance reinvested into the asset column. The asset column continues to grow and, therefore, the income it produces grows with it.

Why the middle class struggle

The middle class has a lack of early financial education and their balance sheets are not balanced. They are loaded with liabilities and have no real assets that generate income. Their only source of income is their paycheck and entirely dependent on their employer.

Simple Observation

The rich buys assets
The poor only have expenses
The middle class buys liabilities they think are assets

Examples of assets that generate income:

Real estate
Stocks
Building a business
CD’s
Gold
Cryptocurrency