This article was written by the original owner of startupguide.com, Ryan Allis, and published on his website in 2012. Read more about why Ryan was happy to hand over his website domain to us here.

When I received Rich Dad, Poor Dad by Robert Kiyosaki, at the age of sixteen, I read it avidly, and was inspired to buy a second book by Kiyosaki called Rich Dad’s Guide to Investing.

In both books, Mr. Kiyosaki talks about his real dad, a professor, who didn’t know too much about money, and his mentor (who he calls his rich dad), who invested, saved, got out of debt, built his own businesses, and over the course of a few decades, accumulated millions of dollars. Kiyosaki’s mentor enabled him to do so much more than he could otherwise have done, and to invest in the causes and people that he really believed in.

I learned a lot about personal finance and investing from my mom, from books, by studying fundamentals-based value investment in public companies, by being an angel investor in fifteen companies through Connect Ventures, and by working with a personal financial advisor since 2007.

1. Pay off your debt

Many people in the United States are in tens of thousands dollars of debt. According to data from the US Federal Reserve, US credit card debt totaled $793.1 billion, with the average household owing around $16,000 on credit cards. For many, this is added to student loans, mortgages, and other forms of debt, each of which is demanding monthly interest payments.

Debt is not always a bad thing, but the key is to not be getting into more debt every month. Pay down that debt as quickly as you can and pay off your debts in the order of the highest interest rates first. If you have a credit card that’s at 22 percent and you have an education loan that’s at 4 percent, pay off the credit card first.

Paying off debt is like a guaranteed return on your investment. While in the stock market, you might get, on average, 10 percent, 7 percent, 20 percent or 30 percent in any particular year, paying off debt offers a guaranteed return on your money, equivalent to the interest rate that the debt carries.

2. Build up your savings

If you’re lucky, you might already be out of debt. Or it could take you a year, or several years, to get to debt freedom. If you have large debts, it could take a decade or two. That’s okay. Just work at it every year.

As you pay off your debt, you’re going to start having a surplus, and when you have a surplus of net assets, those, of course, are called savings. Once you have savings, you can do things with your savings.

See also: Strategies for financial security: How to think about money

The key is to have at least 10-20 years prior to retirement where you can actually build up saving, build up positive net assets and be able to invest them. The secret to true financial wealth is to eventually accumulate enough money so that you can just make money from your money.

You can invest your savings in a money market savings account at your bank that might pull back a half a percent or one percent in return a year. But once you factor in the effective inflation, which has recently been averaging about 2.8 percent per year, you realize that by keeping your money in a savings account, you’re actually losing money every year.

Anything that produces less than 2.8 or 3 percent per year in return is in fact losing money, and your principal (the core amount of money you have) is getting depleted over time. I recommend considering investing in LendingClub where investors over the past few years have been earning 7-14 percent annual returns.

Here are some creative ways to make some extra money on the side to ensure that you make more than you spend each month:

3. Invest in cash-producing assets

Getting out of the middle class — in other words, succeeding to the point where you don’t have to work and you can make money from your investments — requires having cash-producing assets. A cash-producing asset is simply something that, over a period of time, whether it be a month or a year, ends up being worth more than it was worth previously. It could be ownership in a business, a certificate of deposit, or a treasury bond.

Here is a list of some of the most common cash-producing assets out there. You can see that they range in both return and risk type, from savings accounts at the low end to hedge funds, or venture funds at the high end (the most volatile and potentially highest-reward).

4. Use the cash flow that your cash-producing assets or investments are producing to make more investments

This is a really important step that too few people take. If you can invest the returns from your investment, rather than just spending them, they will accumulate much, much more quickly.

Once you have a few stocks, bonds, and so on that generate cash for you, take the annual returns, which are hopefully above the rate of inflation, and keep re-plowing them in to invest.

5. Earn equity in companies you work for or start

As you work, make sure that you’re not only working for companies whose mission you believe in, but you’re working for companies who will give you a share of the upside—who give you ownership (or options to purchase ownership) in the firm that you’re working for.

In fact, if your current firm won’t give you the opportunity to have stock options, I’d have a conversation with your executive team, because they are losing out on an immense source of power.

They may not realize that if a company can align what they love with what their employees love, and align the economic incentives for the company with the economic incentives for their employees, they are likely to experience a dramatic increase in productivity.

And continue the cycle…

Pay off your debt, build up your savings, have net positive savings (or net assets), invest these positive savings in cash-producing assets that create cash flow, and then use this cash flow to invest in more cash-producing assets while earning equity and ownership in the companies you work for, or the companies you start as an entrepreneur. Then continue the cycle over and over.-

This is the simple formula for building wealth. But while it may be simple, very few people actually follow it. If you follow this formula, not for one year, not for five years, but for 20, 25, or 30 years, you’ll most likely be much better off.

Read next: Strategies for financial security: How to invest money

This is the second in a series of three articles which provide a roadmap to becoming a millionaire during your lifetime either by building a business of your own or by consistently saving and investing $1,000 each month for 30 years.

Main photo: Unsplash/Rob Bye

*This article was originally published on October 17th, 2018 and updated on December 11th, 2018.