The Law of Usefulness
Buy assets that pay you. Avoid liabilities disguised as assets.
Your $45,000 car is not an asset - it costs $600/month in payments, $150 in insurance, $200 in gas, and loses $5,000/year in depreciation. That's $16,000/year leaving your pocket. An asset does the opposite: stocks pay dividends, real estate pays rent, businesses pay profits. The rich buy assets. Everyone else buys liabilities and wonders why they're broke.
Deep Dive
Robert Kiyosaki simplified it perfectly: An asset puts money IN your pocket. A liability takes money OUT. Your house? If you live in it, it's a liability (mortgage, taxes, maintenance). A rental property? Asset. Your car? Liability. A delivery vehicle for your business? Asset. Jewelry, designer clothes, boats? Liabilities. They cost money to maintain and depreciate instantly. Here's the wealth-building sequence: (1) Build income. (2) Buy assets that generate passive income. (3) Use passive income to buy luxuries. Most people skip to step 3 on credit. They buy the BMW at 25 to look successful, then spend 40 years paying for it. A smarter person buys assets at 25, lets them compound, and at 45 can afford 10 BMWs with cash - but by then, they've learned that cars don't matter.
Do This Today
Before any purchase over $500, ask: 'Will this make me money or cost me money over the next 5 years?' If it costs money and isn't essential, delay it. Buy assets first.
Avoid This
A house with a $500,000 mortgage that you live in is not an investment. It's shelter. There's nothing wrong with buying shelter - just don't confuse it with wealth building.
"The rich acquire assets. The poor and middle class acquire liabilities that they think are assets."
Remember
- The Rule: Buy assets that pay you. Avoid liabilities disguised as assets.
- The Action: Before any purchase over $500, ask: 'Will this make me money or cost me money over the next 5 years?' If it costs money and isn't essential, delay it. Buy assets first.