If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people strug- gle financially because they do not know the difference be- tween an asset and a liability. "Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets." When rich dad explained this to Mike and me, we thought he was kidding. Here we were, nearly teenagers and waiting for the secret to getting rich, and this was his answer. It was so simple that we had to stop for a long time to think about it. "What is an asset?" asked Mike. "Don't worry right now," said rich dad. "Just let the idea sink in. If you can comprehend the simplicity, your life will have a plan and be financially easy. It is simple; that is why the idea is missed." "You mean all we need to know is what an asset is, ac- quire them and we'll be rich?" I asked. Rich dad nodded his head. "It's that simple." "If it's that simple, how come everyone is not rich?" I asked. Rich dad smiled. "Because people do not know the dif- ference between an asset and a liability." I remember asking, "How could adults be so silly. If it is that simple, if it is that important, why would everyone not want to find out?" It took our rich dad only a few minutes to explain what assets and liabilities were. As an adult, I have difficulty explaining it to other adults. Why? Because adults are smarter. In most cases, the simplicity of the idea escapes most adults because they have been educated differently. They have been educated by other educated professionals, such as bankers, accoun- tants, real estate agents, financial planners, and so forth. The difficulty comes in asking adults to unlearn, or become children again. An intelligent adult "often Feels it is de- meaning to pay attention to simplistic definitions. Rich dad believed in the KISS principle-"Keep It Sim- ple Stupid"-so he kept it simple for two young boys, and that made the financial foundation strong. So what causes the confusion? Or how could something so simple be so screwed up? Why would someone buy an asset that was really a liability. The answer is found in basic education. We focus on the word "literacy" and not "financial liter- acy." What defines something to be an asset, or something to be a liability are not words. In fact, if you really want to be confused, look up the words "asset" and "liability" in the dictionary. I know the definition may sound good to a trained accountant, but for the average person it makes no sense. But we adults are often too proud to admit that something does not make sense. As young boys, rich dad said, "What defines an asset is not words but numbers. And if you cannot read the num- bers, you cannot tell an asset from a hole in the ground." "In accounting," rich dad would say, "it's not the numbers, but what the numbers are telling you.