The #1 Investing Tip For Middle-Class Professionals Struggling To Build Wealth

  1. Old Definition
  2. New Definition
  3. Conclusion
  4. My 6-Figure Passive Income Plan
  5. Why Buying A Home Is NOT Investing
  6. The Best Way For Regular People To Get Rich
man sitting in the back of an SUV with boxes, holding his head in frustration
image by Karolina Grabowska on pexels

Investing is as much about mindset as it is about knowledge. I learned this the hard way early in my career.

Despite following the trinity of mainstream financial advice, which is having a good job, a nice house, and maxing out my 401k, I was not building wealth in any meaningful way.

As an engineer, I would run the numbers, and those numbers would tell me that I would be lucky to have enough to retire by age 65.

I didn’t want to wait until 65 to retire and start living my life. I wanted to be able to do much better than that.

So I started reading and learning.

I read many books that taught me how to build wealth and how to think about money. Some were conventional, focusing on low-cost index funds and 401k’s, but some were less conventional.

One book that helped me change my mindset about money was the now-famous “Rich Dad Poor Dad” by Robert Kiyosaki.

That book taught me to think about money in a whole new way.

I learned that rich people don’t focus on their jobs, their house, and their 401k.

While there are many lessons in this book (and other books), the most important for middle-class Americans is to understand the difference between assets and liabilities.

The main problem that American professionals have with building wealth is that they are doing it wrong. They buy liabilities and think they are assets.

This prevents them from building wealth in any meaningful way.

After I made some simple changes to my mindset from this new understanding of money, I was able to build significant wealth that now provides me with financial security (approaching financial independence).

Today I want to go through this in detail to make sure that you understand the difference and how you can change your mindset to start building wealth today.

Old Definition

One of the main issues with understanding liabilities versus assets is that we are taught to use the traditional accounting definition where assets are what you own and liabilities are what you owe.

In that sense, a car is an asset because you own it. While the loan on that car is a liability because that is what you owe the bank.

If you were to make a balance sheet of your life (which everyone should do, by the way), it might look something like this:


  • house = $250,000
  • car = $20,000
  • TV = $1,000
  • clothes = $2,000
  • furniture = $5,000


  • home mortgage = $200,000
  • car loan = $15,000
  • credit card debt =$5,000
  • student loan = $25,000

Net Worth (equity):

  • $278,000 total assets - $245,000 total liabilities = $33,000 net worth

Technically this is the correct way to calculate your net worth, similar to how a company calculates its shareholder equity on a balance sheet.

The problem with this is that it does not help build wealth because it is incomplete.

Companies always compile an income statement in addition to their balance sheet to help them and investors understand how they make money and where the money is going (we’ll combine the income and cash flow statements for simplicity).


  • salary = $60,000


  • taxes (estimated here) = $8,400
  • mortgage payment (including escrow) = $20,000
  • auto payment = $2,300
  • credit card payment = $1,500 to pay off in 5 years
  • student loan payment = $3,100

Net Income:

  • $60,000 total income - $35,300 total expenses = $24,700

This is the money you have left over to live on after taking away the expenses associated with the “assets” that you own.

This has to cover gas, clothes, food, utilities, cell phone bill, etc.

And then you get to invest what is remaining, if there is anything remaining, at the end of the month.

What is missing from the mainstream conversation is that what most people call “assets” actually cost you money every month.

That house requires a mortgage payment that includes principal, interest, taxes, and insurance.

That car requires a loan payment.

Those credit cards that you used to buy your “assets” require a monthly payment.

In addition to the monthly negative income, most of these “assets” decrease in value over time (called depreciation).

By the time you pay off that car you bought for $20,000, it will probably only be worth $10,000.

Your furniture and clothes won’t be worth what you paid for them.

Only a house is likely to go up in value (though not likely by enough to cover all the associated expenses).

You cannot build wealth if all of your monthly cash flow is going to pay for things that don’t make you rich.

wooden human figure being crushed by rocks
image by Counselling on pixabay

New Definition

This is why Kiyosaki’s simple definition of assets and liabilities is much more powerful for building wealth:

Assets put money in your pocket, while liabilities take money from your pocket.

Many will consider this “oversimplified”, but let me explain how powerful it is for building wealth.

  • If something generates wealth by producing cash flor and/or appreciation, then it is an asset.
  • If something destroys wealth by creating negative cash flow (expenses) or depreciation, then it is a liability.

In this definition, we can reevaluate what we should consider an asset or a liability.

Does a car put money in your pocket or take money from your pocket?


Does furniture put money in your pocket or take money from your pocket?


What about a house that you live in? Does the appreciation cover all the costs of living there?

Unlikely, therefore LIABILITY!

You can see from this definition that most of what the middle-class are taught are “assets” are really liabilities.

They may sit in the asset column of your balance sheet, but they are sucking away your cash flow and keeping you from building wealth.

At this point, you are likely asking, ok, then what counts as an asset and why don’t the middle-class have them on their balance sheet?

That is the right question!

Assets are things that put money in your pocket. This includes investment real estate, public company ownership, private company ownership, intellectual property, etc.

What the rich do different from the middle class is that they INVEST in assets that build wealth.

They take their net income (salary - expenses) and put everything they can into real assets that generate cash flow and appreciation.

These assets generate more money than what they spend on liabilities such as a personal house, car, etc.

That is why they are rich. Their assets generate their wealth, not their job. And their wealth isn’t coming from their house or the 401k, either.

This is obvious from Kiyosaki’s simplified definition, but it is not easy to understand if you follow mainstream financial advice.

If you keep thinking that your car or your house is an asset, you will struggle to build wealth.

Better to think about true assets like investment property or businesses that can replace your salary and more.


Understanding the truth about assets and liabilities is the most important single concept for building wealth in my opinion.

If you do not understand how assets make you rich, you will fight your whole life with little to show for it.

A great summary of how the finances of people look by Kiyosaki is as follows:

  • the poor spend all of their income on expenses like taxes, rent, food, transportation, etc. They have no assets but also few liabilities
  • the middle class buy liabilities that they think are assets, then spend all of their income paying for the expenses those liabilities generate without building significant wealth
  • the rich buy or build assets that generate income that can pay for their expenses and liabilities with money left over

Below is a drawing to help illustrate the point:

image showing the financial statements of the poor, middle class and rich
image from SingSaver

So what is the #1 investing tip for middle-class professionals struggling to build wealth?

Buy assets, not liabilities.

It seems elementary, but millions struggle because they don’t follow this simple concept. Of course, it doesn’t help that we are taught the opposite growing up.

Instead of buying a big house or new car, learn how to buy investment real estate or build a business.

Your wealth will thank you for it.

On a personal note, once I learned the truth about assets and liabilities I made some changes in my life. I moved out of my big, expensive house and made it a rental. I changed jobs to focus on a higher salary with less upward mobility. And I stopped maxing out my 401k so that I would have more money to buy additional single-family rentals.

Over the past decade, I’ve been able to build a portfolio of 7 single-family rentals and one commercial property (50/50 with a partner) that provide me cash flow and equity appreciation every month.

I’m to the point now, where despite having a good job, my assets are bringing in more money than my salary.

I have successfully moved from the “middle class” category above to the “rich” one through investing in assets, rather than liabilities.

You can do it too if you put your mind to it.

Best of luck and let me know how I can help!

Building Arks

After struggling to build wealth early in my career while following traditional financial advice, I set out on a path to learn about investing. Over a decade later, I’m financially secure and working towards full financial independence through real estate and the stock market. I have succeeded in building my financial ark to help me weather whatever storms may come.

I founded Building Arks to help busy professionals like you ignore mainstream advice and build real wealth.

illustration of an ark in the ocean in a storm
Image by jeffjacobs1990 on pixabay

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