Rich Dad Poor Dad is a great read and put things into perspective for me in regards to the subjects you just brought up.
The concept of the rich buy assets versus buying liabilities: Robert writes about the time he wanted to buy a new car. But as we all know, once you drive off the car lot, the value of the car depreciates, becoming a liability because you wouldn't be able to get back what you paid for it. So instead of buying the car, he goes shopping for a property (asset), which he rents out. That rental income is then used to pay for the car payments. So he bought an asset, which will continue to appreciate, to pay for his liability.
Another example, which I've put into practice, is that you can put your kids through college if you plan early enough and invest in real estate. If you buy an investment property, 18 years later, it will have likely appreciated in value, and after 18 years of the tenant paying down the mortgage, would give you additional equity to use. You could use the equity for your kid's college fund, use as a down payment on their 1st home, or to pay for their wedding. And you still have the asset that's still being rented and payed down. That's how the rich pay for assets and not liabilities.
When he discusses to always pay yourself first, he's saying that the first bill you pay, should be to yourself (10% of your income). His first priority with his income is to set aside 10%. He treats himself like the most important creditor and pays that bill first, even if it means he'll be short on another. But logically, who would want to compromise their own credit with this practice, especially if you're barely getting by. That's why it's so hard to fathom. I think he meant that if you practice this discipline, it will force you to live within your means, and by keeping this discipline, you continue to pay yourself 1st, which can ultimately be used towards purchasing assets.
You're right, people like nice things, but those nice things, i.e. boats, cars, diamonds, are not good investments, they're actually liabilities. For example: Go buy one of those luxuries and try to sell it to someone else, and see if you could get back what you paid for it. Once you buy that big screen TV, chalk it up as a liability/Doodad. Good investments put money into your pocket and increase your net worth, i.e. real estate, stocks, notes, etc.
After I read Rich Dad Poor Dad, back in 1999, I was determined to get as much educated as possible in real estate investing, as the book recommended. So, I took many courses, but made sure to put the techniques that I learned into action because it was only when I made money, that I could purchase, plan, and schedule another course. So I essentially paid for my real estate education with my real estate investments.
