Wealth Rule #2 - Acquire and/or Build Assets Only

This is why we don't work for money - we work to either learn, or to build and/or acquire assets that make money for us. To be able to do this, you must first be able to understand what is an asset, and what is not. All rich people do is build and acquire assets; all middle class and poor people do is to acquire liabilities and think that they're assets. This is the main problem area - misunderstanding that assets are liabilities.

Assets puts money in your pocket. Liability takes money out of your pocket. That is the fundamental difference. The more assets you build or acquire that puts money in your pocket, the richer you'll get. Accounting and book keeping textbooks would say other wise, but it's all about how the numbers move in your finances, and for simplicity and brevity and accuracy's sake, stick with the definition of assets and liabilities that I've place here.

Pattern of An Asset

An asset creases income for you, regardless if you're working or not. An example of an asset is a property that is rented out, and after taking out expenses, it still makes you a positive $1000 - your rental property then becomes a $1000/month asset. It can be in terms of stocks and bonds that gives you dividends, or a business which you own that pays you a salary even if you're not there (if you're still working at a business you own, then it's just a job which pays you).

Pattern of A Liability

A liability takes money out of your pocket, always. An example is buying a property that is not rented out, or the rental yield is lower than its monthly payments, and you end up having to pay to topup. It can be that new car, that new phone or computer, that new house - whatever that causes you to take money out to make payments, it's a liability.

Fundamental Rule to Get Rich

Basically, all you need to do is to either acquire and/or build assets that keep giving you positive cash flow in excess of more than you need, and you will be richer beyond what you can imagine.

The difference between the rich is that they keep acquiring and building assets that keep paying them dividends, royalties, rental income etc, and the middle class and poor keep buying stuff that they have to keep paying for (note: the basics are required, of course, such as food, shelter etc - the difference is the spending habits).

Why the rich will almost always get richer and richer is that the more income they get from their assets, they will use it to build and acquire more assets, making it an upward and positive growth spiral, and the middle and poor class will do the reverse.

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