In the book “Rich Dad Poor Dad” by Robert Kiyosaki and Sharon Lechter, an asset is defined as something that puts money into your pocket, while a liability takes money out of it. It’s a simplistic definition that has become the bedrock of many investors’ financial lives.

Another way of looking at assets is as items you either own or control. How you divide and place priority on your assets – a concept known as “motive of ownership” – has a direct correlation with your financial status.

Assets can be divided into four categories:

1. Consumption assets

These are items you own that are meant for personal use or consumption. They generally do not produce income – for example, if you bought a nice car, it is categorised as a consumption asset for your own use as it would not contribute income on a regular basis. A property bought for ownstay is also a consumption asset.

2. Speculative assets

These are bought in anticipation or expectation that they will rise in price in the future. For instance, if you bought a stock for short-term gains, it would be classified as a speculative asset. Likewise, if a property is bought with an intention to be flipped for quick profits, it falls into this category.

3. Income-productive assets

These produce regular passive income, such as stocks that pay out consistent dividends, tenanted properties that generate rental income, a car bought specifically for services such as deliveries or e-hailing, intellectual property that earns royalties, and so on.

4. Oneself

Each person should view themself as an important asset, despite not being “objects” that can be included on balance sheets.

Rich vs middle class

With the above in mind, the following are examples of assets in the balance sheets of the rich versus the middle class. Both groups have all four types of assets, but what distinguishes them is how they prioritise what they own.

Here’s how the asset column of the middle class might look like:

When they make more money, they often choose to upgrade their homes and cars first. After that, they may want to try their hand at trading or flipping stocks, properties, cryptos, ETFs, unit trusts, or just about anything that can be traded in the markets.

Otherwise, they might put their excess funds into fixed deposits, pension funds or other fixed-income funds. Then, finally, they may consider joining personal-development courses with their spare cash.

Now, when it comes to the rich, their asset column would be as follows:

The rich begin by building on their capabilities to make and retain wealth. Once they earn more money, they invest in a portfolio of assets that produces passive income regularly.

It’s not that the rich do not trade stocks, flip properties, speculate on cryptocurrency, or have nice homes or cars. But the difference between them and the middle class is the existence of real assets that can generate consistent income without active labour.

The middle class expands and upgrades their consumption assets as their income grows, but the more they do this, the more these assets require money to sustain them. This leads to greater financial burden in the long run.

If you fall into this category, fret not – it is still entirely possible to change your thinking and money management.

You would, however, have to forgo your ideas about wealth and pick up the principles adopted by the rich, which is more about capitalising on the assets you have, and not so much on how many items of comfort or luxury you possess, or how much money you have in the bank.

This article first appeared in KCLau.com. Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.