Many of us grow up learning about the world through the lens of those closest to us. Consider the tale of two guiding figures, drawn from Robert Kiyosaki's observations – one representing a highly educated path, perhaps a university professor with a doctorate, and the other, someone who learned life's lessons through direct experience after leaving formal schooling early, maybe after the eighth grade. Both might earn enough to live comfortably during their working years. Yet, their financial legacies could be starkly different. One might build significant wealth, leaving millions to their family, while the other, despite academic success, might leave behind only debts. This contrast raises a profound question: Is managing money a kind of practical science often overlooked by traditional education?

The Education We Don't Always Get

Schools and universities excel at preparing us for careers. They teach us professions, guide us toward jobs, and set us on a path to earning a salary. This is the well-trodden road many families encourage, especially if the parents themselves followed it. If our upbringing didn't include exposure to self-made wealth creation – that small percentage who built fortunes through their own efforts – the advice we receive, though well-intentioned, might inadvertently guide us toward financial struggle. It's not a lack of care, but perhaps a lack of alternative knowledge or exposure to different financial philosophies, like those explored in books such as "Rich Dad Poor Dad." This common path – study hard, get a good job, earn a salary – is deeply ingrained in many societies. Reading perspectives that challenge this norm can be eye-opening, potentially shifting one's worldview more profoundly than years of formal study in a field unrelated to personal finance.

Understanding Your Financial Tools: Assets vs. Liabilities

A common belief is that a bigger salary will solve all financial worries. However, the real power often lies not just in the amount of money earned, but in the knowledge of how to manage and grow it. Many people find themselves working tirelessly for money, trading precious time and energy for a paycheck. While earning income is necessary, especially initially, achieving financial independence requires a shift: making money work for you.

To do this, understanding two fundamental financial terms is crucial, even if you've studied accounting before. Let's simplify:

• Assets: These are things that put money into your pocket or increase your net worth over time.
• Liabilities: These are things that take money out of your pocket.

Interestingly, the same item can be either. A car used daily, costing $200 a month in fuel, insurance, and payments, is a liability. But if that same car is rented out, bringing in $200 a month after expenses, it becomes an asset. Assets can include businesses, income-generating real estate, stocks, or other investments. Liabilities often include consumer debt, expensive gadgets bought for status, large houses with high upkeep, or vehicles that depreciate quickly.

The Path to Financial Growth

Grasping the difference between assets and liabilities helps explain a common pattern: why the rich often seem to get richer, while others struggle to improve their financial standing. Those focused on building wealth tend to invest their earnings into acquiring more assets. Conversely, those without this focus might direct extra income towards liabilities. Over time, this divergence widens. Instead of immediately upgrading to the latest phone or car, consider channeling that money into something with the potential to generate more income. It might mean delaying gratification – perhaps not buying clothes from famous brands or the newest gadgets immediately.

Experience: The Unconventional Teacher

Investing hard-earned money, whether in starting a business or backing someone else's, naturally involves risk. The fear of loss is real. But consider the alternative: spending that same money on a new phone when the old one works fine, or buying a bigger TV or a fancier car, especially on credit. These purchases often lead to a definite financial loss through depreciation and interest, without providing any meaningful experience or potential for future gain. Inflation further erodes the value. Taking on debt for consumer goods creates ongoing expenses and financial dependence. While it might project an image of success – "Look at that car!" or "What a nice phone!" – it can leave one's pockets empty and hinder true financial security.

Investing in a business, even if it doesn't succeed initially, offers something invaluable in return: experience. Lessons learned from setbacks can significantly increase the chances of success in future ventures. This practical education, gained through action, often proves more beneficial in the long run than passively consuming entertainment on that new TV bought on credit. Experience, even from mistakes, makes you smarter.

Finding Your Financial Balance

This raises a valid question: "If I can't spend money on what I want, why earn it?" The core idea isn't about deprivation, but about prioritization and smart management to increase overall income and financial freedom. Imagine a household income of $1000 per month, with $500 needed for essential expenses. Of the remaining $500, perhaps $150-$200 can be enjoyed on desired wants. The crucial step is investing the leftover $300-$350 into an asset – something that could potentially grow the total income to $1200 or $1500 over time. This principle applies whether the starting income is $300 or $1 million; it's about allocating funds strategically after covering needs.

The Crucial Mindset Shift

Ultimately, the most powerful lesson revolves around mindset. People stuck in a cycle of financial struggle often work their entire lives for money, believing that simply earning more is the solution. In contrast, those who build wealth may start by working for money, but they quickly focus on accumulating capital to put into circulation, making their money work hard for them. This shift in perspective—from solely being an earner to becoming an owner and investor in assets—is fundamental to changing one's financial trajectory.

References:

• Kiyosaki, Robert T., and Sharon L. Lechter. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! Plata Publishing, 2017.

  This foundational book introduces the core concepts discussed in the article through the contrasting philosophies of two father figures. It elaborates extensively on the difference between assets and liabilities, the importance of financial education outside of traditional schooling, and the mindset shift required to move from being an employee to an investor or business owner, making money work for you. The entire book serves as the primary source for the ideas presented.