The problem with financial education is that it is not taught in schools. So usually parents teach. Unless your parents are in the top 1%, they usually teach how to be poor. Not because they do not love you – they just do not know what they are teaching. They do not read books like “Rich Dad, Poor Dad” by Robert T. Kiyosaki and learn how to work with money.

You have to know the two words assets and liabilities. Forget what you have learned in your accounting classes. We define both in very simple terms. An asset is anything that puts money into your pocket. A liability is anything that takes money from your pocket. Anything can be an asset or a liability. If you own a house and it costs €1000 per month than it is a liability. If you own a house and it brings in €1000 per month than it is an asset. Assets are things like businesses, real estate, stocks or bonds.

Why knowing this distinction is so important? The poor have only expenses. The rich buy assets. And, the middle class buy liabilities that they think are assets.

If people follow everybody’s advice then they get a job that increase income. After the job, they move into a bigger house, buy a BMW and an iPhone 6. People think they are acquiring assets, while they are actually acquiring liabilities. You need to pay every month for the house, for the car and for the expensive phone. In essence, unless you make a paradigm shift about what you do with your money. Which is to buy actual assets, no matter how much income you earn from your job. Your friends might admire your iPhone 6, you might look rich on surface, but you will never actually be rich.

There is nothing wrong having a job. After a curtain asset size, this can be left out – your asset income replaces your job income. But, if you follow the standard narrative, going to school and getting a job, there are chances you are inquiring liabilities which you think are assets. That is the problem. So, keep your job, but keep sure that most of your income goes into real assets, rather than liabilities.Financial independence as today’s freedom can only be achieved by massive assets and comparatively low liabilities. The more assets the more freedom. Every real asset brings you one step closer to wealthiness and independence. Every liability pulls you one step back.

Plus liabilities tend to be less liquid. Assets like stocks or bonds can be liquidated fast. Liabilities, like high living standards, can be only slowly removed. Some got quick rich man underestimate this effect and go bankrupt after their lucky windfall profits.

Some people say: What if I lose money with this business or with this stock? They do not say the same about buying a high-end TV, which will be worthless after two years. And which creates a liability every month. Other would rather lose money e. g. by starting a business. Even if the money is gone then, the lessons learned from starting a business would be more valuable than watching TV. It’s not how much money you make – it is about how much money you save and invest.

As a doctor you pay in Europe approximately 50% just to the government. You get taxed when you earn, you get taxed when you spend, you get taxed if you invest and you get taxed if you die. On the other hand, you could operate with assets and pay up to zero taxes. That is why Warren Buffet pays lower tax rates than his secretary.

You must be out of your mind if you think intelligent people would like to share over half of what they earn with people who want to sit and watch TV all day and collect the benefits the government hand out. The rich are too clever for this. They buy a BMW when no impact is given on the asset side. So, the rich know this distinction by heart. It will always come down to the middle and upper middle class. People who work the hardest today, for the person with a bag of chips in one hand and the remote in the other.

[Summary of the book: Rich Dad, Poor Dad by Robert T. Kiyosaki (link free pdf)]