Rich Dad Poor Dad is a starting point for anyone looking to gain control of their financial future

Rich people acquire
assets. The poor and
middle class acquire
liabilities that they 
think are assets.

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Rich Dad Poor Dad
45
Rule #1: 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 number 
one. 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 that they think are assets,” said rich dad.
When rich dad explained this to Mike and me, we thought he 
was kidding. Here we were, nearly teenagers and waiting for the
secret to getting rich, and this was his answer. It was so simple that
we stopped for a long time to think about it. 
“What is an asset?” asked Mike.
“Don’t worry right now,” said rich dad. “Just let the idea sink in.
If you can comprehend the simplicity, your life will have a plan and
be financially easy. It is simple. That is why the idea is missed.”
“You mean all we need to know is what an asset is, acquire them, 
and we’ll be rich?” I asked.
Rich dad nodded his head. “It’s that simple.”
“If it’s that simple, how come everyone is not rich?” I asked.
Rich dad smiled. “Because people do not know the difference 
between an asset and a liability.”
I remember asking, “How could adults be so misguided? If it is 
that simple, if it is that important, why would everyone not want to 
find out?” 
It took rich dad only a few minutes to explain what assets and
liabilities were.
As an adult, I have difficulty explaining it to other adults. The 
simplicity of the idea escapes them because they have been educated 
differently. They were taught by other educated professionals, such 
as bankers, accountants, real estate agents, financial planners, and so 
forth. The difficulty comes in asking adults to unlearn, or become 

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Chapter Two: Lesson 2
46
children again. An intelligent adult often feels it is demeaning to
pay attention to simplistic definitions.
Rich dad believed in the KISS principle—Keep It Simple,
Stupid (or Keep It Super Simple)—so he kept it simple for us, and 
that made our financial foundation strong.
So what causes the confusion? How could something so simple
be so screwed up? Why would someone buy an asset that was really
a liability? The answer is found in basic education.
We focus on the word “literacy” and not “financial literacy.”
What defines something to be an asset or a liability are not words.
In fact, if you really want to be confused, look up the words “asset” 
and “liability” in the dictionary. I know 
the definition may sound good to a 
trained accountant, but for the average 
person, it makes no sense. But we 
adults are often too proud to admit that 
something does not make sense.
To us young boys, rich dad said, “What defines an asset are not 
words, but numbers. And if you can’t read the numbers, you can’t tell 
an asset from a hole in the ground.” “In accounting,” rich dad would 
say, “it’s not the numbers, but what the numbers are telling you. It’s just 
like words. It’s not the words, but the story the words are telling you.”
“If you want to be rich, you’ve got to read and understand 
numbers.” If I heard that once, I heard it a thousand times from my 
rich dad. And I also heard, “The rich acquire assets, and the poor and 
middle class acquire liabilities.”
Here is how to tell the difference between an asset and a liability. 
Most accountants and financial professionals do not agree with 
the definitions, but these simple drawings were the start of strong 
financial foundations for two young boys.