Robert Kiyosaki offers a definition of Assets and Liabilities that he claims is the key to getting rich. He argues that a strong, financial education is needed to build a strong financial foundation.
And for Kiyosaki, the number one rule to building a strong foundation is that one “must learn the difference between an asset and a liability- and buy assets.” He suggests that many people struggle financially because they can’t differentiate between an asset and a liability.
What is an asset?
Kiyosaki’s definition of an asset is “something that puts money in your pocket.” Many things like real estate, business, and products can be considered assets.
He argues that “rich people focus on building their assets.”
What is a liability?
In contrast, a liability is “something that takes money out of your pocket.”
According to Kiyosaki, a liability can include things such as cars, holidays, eating out, subscriptions, and more. “If you look at the budget of a poor person, you’ll see that it is full of liabilities and has no assets, ” he argues.
What is the difference between an asset and a liability?
Kiyosaki looks at the example of a house. He argues that many people see a house as an asset. But for him, “your house is not an asset.”
Why?
For Kiyosaki, a person’s house is not an asset because it takes money out of their pocket every month through taxes, insurance, mortgages, and maintenance costs. A house only becomes an asset if it can be sold at a profit.
On the other hand, a rental house may be an asset if the owner collects more rent than they pay in costs every month.
“The rich don’t work for money”
Kiyosaki points out that rich people don’t work for their money through income as employees do. Instead, they invest their money in assets that create more money.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.