Buy Assets Not Liabilities To Build Wealth

What Are Wealth Building Assets And Why You Should Buy Them

buy assets not liabilitiesPin

What does it mean to buy assets not liabilities?

Buy assets not liabilities is an investing and money management concept made popular by Robert Kiyosaki.  Mr. Kiyosaki is the author of Rich Dad Poor Dad, a best-selling personal finance book.

Buy Assets Not Liabilities

He teaches that if you want to build wealth then buy assets not liabilities.

And I couldn’t agree more.  So, I want to explain this concept and discuss the nature of buying wealth building assets.

Rich Dad Poor Dad Assets And Liabilities

The book states…

“You must know the difference between an asset and a liability, and buy assets…. Rich people acquire assets.  Poor and middle-class people acquire liabilities, but they think they are assets.”

I’m an accountant by education and a CPA.  So, I know more than I care about accounting for a company’s assets and liabilities.

But when it comes to our finances, the definition of assets and liabilities is a little different.  The definitions are quite simple.

For our purposes, an asset is anything that creates money for you.   In contrast, a liability is anything that costs you money.

5 Types Of Wealth Assets

I think of about wealth assets and liabilities in these 5 categories:

  1. Assets that appreciate in value
  2. Income producing assets
  3. Assets that do both #1 and #2 – appreciate and produce income
  4. One’s time as an asset
  5. Assets that cost us money (also known as liabilities)

Let’s discuss each of these a bit more.  Why?  It will help us understand what assets to buy.

Specifically, we want to buy assets 1 through 4.  They represent good assets to buy. And in today’s world, it’s easy to invest in different asset types.

And, we want to minimize our spending on assets in category 5.  They are assets that cost us money.

These categories are our road map to ensure we buy assets not liabilities.

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

1. Buy Assets That Appreciate In Value

buy assets that appreciatePin

Appreciating assets are things that will be worth more in the future than what we paid for them.  In the strictest sense, these assets do not produce income.

Raw land is a perfect example.  Let’s say you bought a piece of land on the edge of the city you live in.

You hope that as the city grows and expands the value of the land will increase.  As that area of the city’s real estate market develops you want to sell the land to a buyer for more than you paid for it.

In this case, while you own the land its value increases.  Since it is undeveloped it provides no income.

There are many examples of assets that can appreciate.  Ownership in a rapidly growing business, commodities, precious metals, jewels, and collectible items are just a few.

What they all have in common is an opportunity to increase in value over time. But, it is important to note that not all assets will appreciate all of the time.

You must buy at a fair price and hope that demand for the item increases in the future.  They are 2 very important characteristics when looking to buy assets that represent some of the more unique investment ideas.

2. Buy Assets That Produce Income

buying assets for incomePin

Income producing assets are things that will pay you a regular cash stream for as long as you own the item.  The cash stream is also referred to as passive income.

Once you buy the asset, there’s nothing more required to collect your income stream.  Sometimes this is referred to as making money while you sleep.

A bank savings account is an example of an income producing asset.  You deposit money in the savings account and the bank pays you interest.

Your original deposit will be worth the same in the future as it is today.  It is not an appreciating asset.  That deposit produces passive income for you in the form of interest.

Other types of income producing assets include:

  • Bonds
  • Certificates of deposit
  • Money market accounts
  • Loans

Buy assets of this nature and create multiple streams of passive income from different assets.

3. Buy Assets That Appreciate AND Produce Income

For my purposes, I prefer to buy assets that produce income and appreciate in value Dividend stocks are a great example of an appreciating asset that also produces income.

Dividend stocks are sometimes referred to as dividend growth stocks.  They have an added benefit.  Many companies increase their dividend as time passes.

So, dividend growth stocks offer income today.  Furthermore, a higher income stream from dividends in the future.  Finally, history shows the price of the most dividend stocks will increase in value over the long run.

When buying stocks, make sure you keep your costs low. I trade stocks for free using the Webull app.

Webull LogoPin
Click to learn more about Webull

For a limited time, Webull is offering free stock when you sign up. Learn more about Webull here.

4. Your Time Is An Important Asset

Time is a wealth building assetPin

Your time has tremendous value.  It is not an asset you can buy more of.  Everyone has the same 24 hours in a day and that’s it.

But your time is an asset you can invest in.  You can invest in your time by using it efficiently.  Don’t waste it.  You can’t ever get wasted time back.

You can also make your time a more valuable asset.  Invest wisely in higher education, job training, and seminars.

Look at these developmental opportunities as buying an asset to improve the value of your time by increasing your knowledge and skills.

5. Minimize Buying Assets That Are Liabilities

So you may be asking, how can an asset be a liability?  And that is a fair question.  Let me explain.

For most of us food, transportation, and shelter make up the largest spending in our budget.  All of these assets cost us money.

We can’t eliminate buying these assets that are liabilities in disguise.  But we can minimize them.  And we must minimize them to build wealth.

Let’s break down the big 3 assets that are liabilities one at a time.  I’m not telling you to save every last nickel and deprive yourself.  Use common sense and exercise some moderation.

And, for many of these purchases, be sure to save money using Rakuten. In addition, get $10 free cash just for signing up.

Sign up with Rakuten here.

Food And Beverages

We all have to eat.  But there are a few simple rules to keep food and drinks from eating up your budget.

  • Buy ingredients and prepare food at home
  • Purchase grocery items when they are on sale
  • Make a grocery list to keep impulse buys to a minimum
  • Avoid higher cost prepared foods in the grocery store
  • Minimize dining out
  • When dining out have your cocktails at home


a house is a liability not an assetPin

Do not buy more house than you need.  Yes, a house is an asset that may appreciate.

But unless you happen to live in an area with significant housing appreciation, the value of your home will only increase with inflation.  And inflation has been pretty low in recent years.

What’s worse, your house requires constant maintenance and upgrading.  I just had a new roof put on our house, replace damaged gutters, and am having the attic insulated.

These projects are really expensive.  And we will need to do more in the future.  The furnace, air conditioning, and driveway all have about 3-5 years of useful life left. But, I have to make these improvements to maintain the value of the home. 

And don’t forget the interest expense and real estate tax portion of the mortgage payments.  Put it all together and my house is a money-sucking black hole.


cars are not an assetPin

Avoid luxury, high priced automobiles.  We all need to get from place to place but consider buying a moderately priced, used vehicle.

New vehicles lose value rapidly.  And luxury autos cost more to maintain and insure.

For example, I’m still driving my 2009 Toyota with 150,000 miles.  It gets me where I need to go efficiently and economically.

It provides nothing more, nothing less.  And I’m okay with that.  But, I have to confess that I bought it new.

Turn Liabilities Into Income Producing Assets

Today’s gig and internet-based economy have created opportunities to turn your liabilities into assets with a strategy to produce income.

These options may not be for everyone, but consider renting out a room in your home.  Or, using your car to drive for Uber.

If you start a side gig like this, be careful with your time.  Make sure the side gig is the best use for it.  Remember your time is a very important asset.

Summary:  Buy Assets Not Liabilities

There is great wealth-building wisdom in the words of Robert Kiyosaki.  So, remember to buy assets not liabilities.

But, what are the best assets to buy? Let’s talk about that topic now.

What are good assets to buy?

The best assets to buy and invest in are:

  • Assets that appreciate
  • Income producing assets
  • Assets that appreciate AND produce income
  • Your time

This list represents the best assets to build wealth.

Minimize your liabilities by:

  • Not buying more house than you need
  • Purchasing a used, moderately priced vehicle
  • Avoiding unnecessary spending on groceries and drinks

Miminize your spend on these items to build wealth.

Further Reading About Buying Assets

My Favorite Money And Investing Resources

  • Webull: Trade stocks at no cost and get free stock for a limited time
  • Save on all your purchases and get $10 cash for signing up with Rakuten

Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.

Now Go Forth And Buy Assets Not Liabilities To Build Your Wealth!