Assets and Liabilities: Explained for Those Who Haven’t Read Rich Dad Poor Dad

To manage your money wisely, you must learn to see it through the eyes of an investor. Thinking like an investor means understanding the difference between assets and liabilities.

That’s where it all begins. Robert Kiyosaki explains it best:

“Assets are what put money into your pocket. Liabilities are what take money out of your pocket.”

Some might argue that this definition doesn’t match classical accounting principles — where assets represent what you own, and liabilities are what you owe — but Kiyosaki’s view makes the concept of wealth simple and practical. It helps you instantly see whether something makes you richer or poorer.

Interestingly, assets and liabilities can switch roles. For example, cash in your wallet is technically a liability — it loses value over time. But when you place it in a savings account or investment that generates interest, it becomes an asset that produces passive income.

As Kiyosaki puts it:

“The rich acquire assets. The poor only have expenses. The middle class buys liabilities they think are assets.”

The fewer liabilities and more assets you have, the stronger your financial foundation. Of course, this doesn’t mean you should immediately sell your home or car — but it’s important to realize they usually don’t generate income and require constant expenses.

When you start viewing your possessions through the eyes of an investor, you’ll free yourself from many illusions — including the illusion of ownership “profitability.” Every possession has two prices: the price of purchase and the price of ownership.

“A poor person has no assets. Everything he owns is a liability that costs money instead of bringing it.”
— Robert Kiyosaki

The goal of any financial plan is to learn to live off passive income. At the starting point, you must clearly understand what assets and liabilities you already have — and how balanced they are. It’s time to review your personal balance sheet.

And one more important thing:

“Many people want money but avoid the learning process. They don’t realize that it’s not money that makes you rich, but the process. That’s why we often hear about lottery winners or heirs who quickly lose everything — they never went through the process.”

“People fail to become rich because they prefer the comfort of a steady paycheck over the discomfort of learning. But it’s through learning that you gain both financial intelligence and real wealth.”