Assets and Liabilities: For Those Who Haven’t Read Rich Dad, Poor Dad

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

Robert Kiyosaki explains this distinction simply:

“Assets are things that put money in your pocket. Liabilities are things that take money out of your pocket.”

While this definition may not align perfectly with traditional accounting principles — where assets represent what you own and liabilities what you owe — Kiyosaki’s version offers a clear and practical lens: does something make you richer or does it drain your finances?

This simplicity is what makes it so powerful, especially since assets and liabilities can switch roles. For instance, cash sitting idle in your wallet is a liability — it loses value over time. But once deposited in an interest-bearing account, it becomes an asset that generates passive income.

Kiyosaki summarizes it perfectly:

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

The fewer liabilities and the more assets you have, the better. Of course, this doesn’t mean you should immediately sell your house or car — but it’s worth recognizing that these items often don’t generate income and require ongoing expenses.

Seeing your possessions through the lens of an investor helps you shed illusions about ownership. Many people chase possessions, forgetting that everything has two prices: the purchase price and the cost of ownership.

Kiyosaki also reminds us:

“Poor people have no assets. Everything they own are liabilities that bring expenses instead of income.”

The goal of a sound financial plan is to live off your passive income. To begin this journey, you need to identify your current assets and liabilities — and understand how balanced they are. This is the foundation of your personal financial balance sheet.

And one final thought:

“Many people chase money but avoid learning. They don’t realize that it’s not money that makes you rich — it’s the process. That’s why we often hear about lottery winners or heirs who soon go broke. They never went through the process of becoming financially intelligent.”

As Kiyosaki puts it, financial education is the true path to lasting wealth.