Buy assets, not liabilities.

Rich people buy assets, middle-class people buy liabilities that they think are assets, and poor people only have expenses. If you want to be rich, stock up on assets that will generate a good cash flow for you.

1. Understand the difference between an asset and a liability.
   An asset puts money in your pocket, while a liability takes money out of your pocket.

2. Apply the above definition to real life.
   When trying to differentiate between the two, consider the cash flow, time, taxes, bank loans, etc., that will come into and come out of the asset/liability. Are you making a profit or a loss? If you are making a loss, it’s a liability, and you should stay away from it. If you are making a profit, it is an asset, and you should buy it!

3. Know the real assets that will help you become rich.
   The main ones are:

   • Businesses that do not require your presence: you own them, but they are run or managed by others.
   • Stocks.
   • Bonds.
   • Mutual funds.
   • Income-generating real estate.
   • Notes (IOUs).
   • Royalties from intellectual property (e.g., patents).