To Be Rich Is Simple: Just Buy Assets, Avoid Liabilities, Spend Less Than You Earn, Save, and Invest

Achieving financial freedom and building wealth doesn’t have to be as complicated as many people believe. In fact, the principles behind becoming rich are surprisingly simple. The key to wealth lies in how you manage your money, what you spend your money on, and your commitment to saving and investing consistently over time. The process of building wealth doesn’t require you to make a huge salary, take massive risks, or know intricate financial strategies. It comes down to a few basic, yet powerful, principles that can help you grow your wealth and achieve financial independence.

In this article, we’ll break down these simple principles that lead to wealth: buying assets, avoiding liabilities, spending less than you earn, saving at least 10% of your income, and investing another 10%. These steps, when followed consistently, can guide anyone toward financial success and long-term wealth.

1. Buy Assets, Avoid Liabilities

One of the most fundamental pieces of financial wisdom comes from Robert Kiyosaki, the author of Rich Dad Poor Dad. He famously differentiates between assets and liabilities. Assets are things that put money into your pocket, while liabilities are things that take money out of your pocket. The rich focus on acquiring assets, while the poor and middle class often accumulate liabilities.

• Assets can be real estate that generates rental income, stocks, bonds, businesses, intellectual property (such as books or patents), and even certain collectibles like art or antiques. Essentially, assets are anything that appreciates in value or produces passive income over time.

• Liabilities, on the other hand, include things like personal debt, mortgages, car loans, and consumer goods that lose value over time (such as electronics or luxury items). They’re expenses that cost you money instead of earning you money.

To build wealth, it’s essential to focus on accumulating assets and avoiding liabilities. When you buy things that will appreciate in value or generate passive income, you’re putting yourself in a position to build wealth. For instance, owning rental property allows you to earn rental income each month, while a car loan is a liability that takes money from your pocket each month for payments.

One key aspect of this strategy is being mindful of what you’re purchasing. People often get caught up in buying things that look attractive but are actually liabilities. A flashy car, for example, may give you temporary pleasure, but it depreciates in value as soon as you drive it off the lot, and it’s a constant drain on your finances through maintenance, insurance, and fuel costs.

2. Spend Less Than You Earn

One of the most powerful habits you can develop on the path to wealth is to spend less than you earn. This sounds simple, but it’s a concept that many people overlook or ignore. The idea is to live below your means and save the difference.

• Living below your means doesn’t mean depriving yourself. It means being intentional with your money and making thoughtful choices about what you spend. Instead of spending every penny you make, make a conscious decision to put aside a portion of your income for savings and investments. This is how you begin building wealth.

• Delayed gratification is another important concept tied to this principle. Instead of immediately spending money on non-essential items, focus on saving and investing for the future. This practice requires discipline, but over time, it pays off.

• You don’t need to be frugal to the point of being uncomfortable, but you should prioritize your financial goals. If you’re able to save and invest a portion of your income rather than spending it on temporary pleasures, you’ll begin to see your wealth grow over time.

3. Save at Least 10% of Your Income Every Month

Once you’ve learned to spend less than you earn, the next step is saving at least 10% of your income every month. Saving is the foundation of wealth-building. Saving money doesn’t mean hoarding it under your mattress; it means putting it aside in a secure, interest-bearing account, or using it to fund investments.

By setting aside 10% of your income for savings, you’ll create a safety net and have the funds necessary for future opportunities. Here’s why saving is essential:

• Emergency fund: First and foremost, having savings helps create an emergency fund for unforeseen expenses, like medical emergencies or job loss. An emergency fund can prevent you from having to rely on credit cards or loans, which can lead to more debt and financial instability.

• Opportunities for investment: Savings give you the liquidity to take advantage of investment opportunities when they arise. For example, you might come across a great stock, a property to purchase, or an investment vehicle that requires cash. Without savings, you won’t be able to seize those opportunities.

• Peace of mind: Having savings means you can sleep well at night knowing that you have a buffer between you and financial hardship. It reduces stress and allows you to focus on growing your wealth rather than worrying about your financial situation.

4. Invest Another 10% of Your Income

While saving is crucial, investing is the key to building wealth over the long term. Saving allows you to accumulate capital, but investing allows that capital to grow. The goal is to have your money working for you rather than simply working for money.

Investing 10% of your income every month gives you the chance to build wealth passively. Over time, compounded interest can make a significant difference in your financial standing. Here's why investing is important:

• Compound interest: One of the most powerful forces in wealth-building is the concept of compound interest. By investing early and consistently, you allow your returns to grow exponentially over time. The earlier you start investing, the more powerful the effects of compounding will be.

• Diversifying income sources: Investing in assets like stocks, bonds, real estate, or even starting a business creates multiple streams of income. This diversification ensures that you’re not reliant on a single income source and increases the likelihood of building wealth.

• Building long-term wealth: Investments grow over time, and the longer you stay invested, the more your wealth can compound. You don’t need to be an expert to start investing, but you do need to be consistent. Over time, your portfolio can grow substantially, allowing you to build a much larger financial base than if you had just saved money alone.

5. The Importance of Consistency

The key to all of these principles is consistency. Building wealth isn’t something that happens overnight; it’s a gradual process that requires patience and persistence. By consistently buying assets, avoiding liabilities, saving, and investing, you’ll see your wealth grow slowly but steadily. The more disciplined you are in following these principles, the more likely you are to achieve long-term financial success.

6. Conclusion

To become rich, you don’t need a complex financial strategy or insider knowledge. The process is simple:

1. Buy assets, things that generate income or appreciate in value over time.
2. Avoid liabilities, things that cost you money and depreciate in value.
3. Spend less than you earn, and prioritize saving and investing.
4. Save at least 10% of your income each month to create a safety net and capital for future opportunities.
5. Invest at least 10% of your income to make your money work for you and build long-term wealth.

By consistently following these principles, you can take control of your financial future, reduce your financial stress, and build wealth that will last for generations. It’s not about having a high income, but rather about managing the income you have wisely. Start today, stay committed, and watch your wealth grow over time.