Buy Assets Not Liabilities

I can sum up this post in six words:

Buy more assets. Buy fewer liabilities.

These definitions come from Robert Kiyosaki’s Rich Dad Poor Dad, rather than from accounting:

An asset is anything that puts money into your pocket. Assets tend to grow in value over time. Examples include shares, bonds, rental property and businesses.

A liability is anything that takes money out of your pocket. Money spent on liabilities is gone, and liabilities usually lose value over time. A car is a good example.

To build wealth, focus on buying assets that produce cash. They work for you around the clock.

When investing, your capital is at risk. This is not financial advice.

An example: BP shares

Dividend shares are a good example. Let’s look at BP, a share we owned when we first wrote this article.

Say you bought 10,000 BP shares at the start of 2016. For that one-off purchase, cash landed in your account every three months:

• Q1 2016: just over £700
• Q2 2016: £691
• Q3 2016: £755

In total, you’d have received £2,942 in dividends in 2016, £2,990 in 2017 and £3,056 in 2018. That’s about 30% of your original cost back in three years, from dividends alone.

On top of that, BP’s share price rose by about 60% over the same period. Add the dividends and you’d have made close to 100% in under three years.

Part of the rise in dividends in pounds came from currency movements. BP pays dividends in US dollars, and its payout stayed at 10 cents a share each quarter for most of that time. When the pound fell after the Brexit vote, those dollars turned into more pounds.

What happened next

In August 2020, after a record loss in the pandemic, BP halved its dividend to 5.25 cents a share. It was its first cut since the Deepwater Horizon disaster in 2010.

BP has raised its dividend several times since then. But in September 2026, it paid 8.66 cents a share, or about 6.41p. On 10,000 shares, that’s about £641 a quarter, still less than the roughly £700 you’d have received in 2016.

The lesson? Dividends are never guaranteed. A company that relies on one industry, such as oil, can cut its payout when that industry hits trouble. Holding a diversified mix of assets, for example through a global index fund or a spread of dividend shares, protects you from relying on any single company.

Now compare a liability

Now imagine you buy a new car instead. Each year, it pays you exactly £0 for owning it. You’ll spend money on insurance, servicing and repairs. And it loses value from the day you drive it away, so you’ll struggle to sell it for anywhere near what you paid.

That doesn’t mean you should never buy a car. But know which of your purchases make you richer and which make you poorer.

Buying an asset is like giving yourself a gift that keeps paying you over time. Buying too many liabilities enriches other people, like the car dealer, rather than you.

Make this the year you buy assets

Aim to buy lots of small money-making assets and fewer money-draining possessions. Want ideas? Read our top 5 income-generating assets actually worth owning.

Use your ISA allowance (£20,000 a year) so the income and growth from your assets are tax-free.

Disclaimer: This is not financial advice. The value of investments and the income from them can go down as well as up. Past performance is not a guide to future returns.