You work long, stressful hours for your money. Make sure your money works harder. We’ll talk about how to invest in smart assets and enlist what I call money “mercenaries.” This ensures that your money’s constantly fighting for your future wealth…even when you’re not.

Introduction to Investing in Assets

I first discovered the power of investing in assets when I read Robert Kiyosaki’s infamous Rich Dad, Poor Dad. For those unfamiliar, it’s one of the most simple yet powerful personal finance books on the market. The concepts may initially appear elementary, but it’s a life-changing read for those willing to soak it in.

This post delves into my personal approach to one of Kiyosaki’s key tenets: invest in assets. Broadly speaking, the idea is to spend money buying assets, that make you more money…to buy more assets. This creates a virtuous circle. Ultimately, the goal is to build a large enough portfolio of these assets that the system becomes self-sustaining.

By diligently investing in assets, you create a situation where your money is working even harder than you. The payoff is enhanced flexibility, freedom, and ability to take calculated risks. In short, life becomes pure. Your work, social activities, and responsibilities are no longer governed by the need to survive. Instead, they are dictated by your aspirations to thrive.

Putting Theory into Practice

This seems great on paper. But how do we put theory into practice? All money advice sounds awesome until your favorite clothing brand drops that new spring collection. Or that car salesman starts talking about the can’t-miss features in the latest model. That practical money talk starts to fade. You simply can’t live without those self-chilling cup holders or the electronic fragrance system…

See, knowing what to do with your money is only half the battle. Building a mental framework to execute your plan is equally important. That’s why I developed my “Mercenary Mindset” to investing in assets. It brings the process to life. It keeps me committed. My hope is that you can adapt my system to suit your individual needs as you chart your unique path to prosperity.

What is an Asset?

“You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know.”

Robert Kiyosaki

Before we tackle the mindset needed to successfully invest in assets, let’s briefly hit the basics. First, what exactly is an asset?

Kiyosaki’s defines it quite simply. He writes that an asset is anything that puts money into your pocket. Conversely, a liability is anything that takes money out of it.

While this is oversimplified from a technical finance perspective, it’s a useful starting point for our conversation. Personally, I think it places too much emphasis on the cash flow of an asset while dismissing appreciation potential.

For instance, a market index of stocks may grow over time despite paying minimal dividends. This portfolio of stocks is still certainly an asset on an investor’s personal balance sheet. The same could be said for a real estate investment that generates marginal cash flow in a rapidly appreciating market.

Given these counterexamples, I would augment Kiyosaki’s definition. My take: an asset is anything that puts money into your pocket or holds economic value that is reasonably expected to increase over time.

Invest in Smart Assets

Not all assets are created equal. “Smart” assets represent the cream of the crop. Assuming you don’t carry high interest student loans or consumer debt, try to spend as much time and money on these as possible. Examples include:

  • Stocks
  • Bonds
  • Real Estate Investments
  • Small Businesses / Side Hustles
  • Digital Assets (domains, apps, online courses)
  • Commodities

Each of these categories could be the subject of an entire post, but notice the common theme. These are not purchases that bring immediate joy or comfort. Rather, they require a laser focus on long term goals and acceptance of delayed gratification. You won’t magically save the down payment for a real estate investment overnight. But you can systematically commit to socking money away for one. Eventually, this allows you to buy an asset (a real estate investment) that could create thousands of dollars in annual cash flow while appreciating in value.

Bottom line: these smart assets aren’t super fun or sexy. The wealth they can create, however, is both of those things.

Avoid Excessive Investment in Dumb Assets

Like I said, not all asset investments are created equal. Here are a few of the key ones to avoid if you hope to minimize the time it will take to reach financial freedom.

An important caveat before jumping in. My point is not that you should avoid all assets that I’ve classified as “dumb.” Life is meant to be savored and enjoyed. There’s no point of building infinite stacks of cash in your bank and letting them sit around.

That’s not the goal. I want you building incredible wealth so that you can buy all of the dumb assets that you ever wanted someday. Just don’t fool yourself into thinking these purchases represent a great investment.

Dumb Asset Investment #1 – Anything with a Motor

Cars, boats, motorcycles, ATVs, planes, jet skis. Ugh, I know. These are some of the most thrilling inventions that humans have created.

Unfortunately, almost nothing depreciates quicker (ignoring specific vintage / collector’s edition models). Beyond the disheartening depreciation, the story gets worse. These items cost additional money to use, store, clean, insure, and maintain.

Now, in certain scenarios, an automobile is a valid necessity. I get it, but don’t try to justify buying the Porsche over the Hyundai because I told you to invest in assets. That’s a lifestyle choice I can absolutely support if cars are your thing. It is not, however, a sound investment decision.

Dumb Asset Investment #2 – Collectible Clothing / Apparel

I hope this one isn’t surprising.

No, that limited edition Gucci jumpsuit you camped outside for is not a smart asset. Yes, it might be rare and highly coveted. Yes, there’s a small chance it could rise in value if you keep it in pristine condition. This doesn’t mean it’s a sound way to build wealth. Any purchase in this category is speculative, subject to fads, and incredibly easy to damage. Sorry Hypebeast.

Dumb Asset Investment #3 – Vices

Cigars, fine wine, rare alcohol.

Don’t get me wrong, I love an extravagant bottle of California Cab as much as the next guy. I just don’t view my purchase as an investment…it’s an expense. A price I pay to have a nice time.

Granted, if you have seven or eight zeroes in your bank account, these vices could offer a nice vehicle for diversification. It’s a convenient way to marry a personal interest with an uncorrelated asset class.

For those of us that haven’t quite hit mogul status, I’m content drinking to my 7-8% long term returns in a diversified index portfolio. Cheers!

Invest in Assets with a Mercenary Mindset

The Mercenary Mindset to money is a mental approach that I developed right around the time I started getting serious about investing. I quickly realized that exercising an abundance of patience over long periods of time was critical to success as an asset investor.

Easy to say, but very hard to do. My solution? The Mercenary Mindset.

What is the Mercenary Mindset?

This may sound cheesy, but it works.

Each day, I picture every dollar that I’ve ever invested into a smart asset as a warrior or “mercenary” enlisted in my financial military. I literally envision them waking up (before me), strapping on their armor, and going to battle to secure my future wealth.

I know they’re fighting doggedly on my behalf. My goal as their leader: support the mission at all costs. This means doing whatever I can to invest more money.

Each type of asset that I invest in has a unique story associated with it. For instance, when I dump money into my passive index funds, I frame this as “deploying additional troops.” Investing in index funds is a numbers game, and I need as many troops on the battlefield as possible. It’s a war of attrition.

Alternatively, I associate alternative investments like real estate with secret missions that require me to call in “special forces.” My rationale? Real estate provides a unique way to build wealth in a shorter time frame with a lower initial investment. In mercenary-speak, real estate special forces can inflict greater damage with less boots on the ground (through the power of leverage).

I won’t bore you with the metaphors that I’ve constructed for each type of asset. I think you get the idea.

You also probably think this is really dumb. In the wise words of college football legend Lee Corso: not so fast, my friend.

Why does it work?

Let’s face it. Investing consistently in a smart asset like a diversified index fund is about as fun as watching paint dry. That’s why only a small fraction of those that know it’s a good idea follow through with it.

And frankly, I get it. The deck is absolutely stacked against young investors. There are infinitely more fun ways to blow cash. Thousands of large corporations and marketing firms spend billions of dollars per year to sell you shiny new toys. Or the dream of buying a lifestyle that you never knew you needed. Social media amplifies the effects further. Unfortunately for most young professionals’ bank accounts, these marketers are pretty darn good at their jobs.

It’s easy to spend every dollar you earn and see why that’s so fun. You’re creating an immediate payoff. Whether it’s in the form of delicious food or a car that’s exciting to drive, these benefits are tangible. The idea of a larger bank account 30 years down the road sounds great, but it doesn’t feel palpable.

The beauty of this mercenary approach to investing in assets is that it gamifies the process. It allows us to use our instinctual monkey brains to our advantage. We’re tricked into thinking that a boring, prudent approach to investing is part of a compelling game or story line.

Objectively, nothing has changed. But creating this sort of investing narrative is a powerful way to coax increased personal commitment and counteract the constant onslaught of marketing garbage. I encourage you to give it a shot.

Final Words

We’ve covered a lot of ground here. You should now have a basic understanding of what assets are and why you should invest in smart ones. Additionally, you should recognize the challenges associated with remaining committed to your asset investment plan.

To combat these challenges, I’ve developed my Mercenary Mindset. You don’t necessarily need to personify your investments in the same way. (But please feel free to steal my method if you find it helpful!)

The core idea is to find a way to gamify the wealth creation process. We must force our minds to appreciate the thrill of investing today to create a better future. Remember, the deck is stacked against us. If we don’t make a conscious effort to fend off marketers and external distractions, competing for a share of our wallets by nestling their way into our hearts and minds, it’s easy to get sucked in.

Find a financial path you want to follow and fight like hell to stay on it. Better yet, have your money mercenaries fight for you.