This post is relevant for so many reasons and on so many levels. If you have had the pleasure of reading any of Robert Kiyosaki's books, the author of Rich Dad Poor Dad, you already have a grasp of the asset/liability relationship. The author goes on to state that most business majors in college, other business professionals, real estate agents, and salespeople ALL should know and understand this relationship. Sadly, most do not. After you read this blog and have an understanding yourself then feel free to poll people in the above mentioned professions and see for yourself if his predictions still holds true today. But just for starters, what does this relationship mean to you? Is it your car insurance..? Your car payment? Or your home insurance?
With a firm understanding of this relationship. Asset and liability can never be separated. It's like a quarter. You can have heads or tails. One person or side is heads and the other person/side is tails. Winner/loser... in this relationship there really isn't a "win/win" let me explain.
How much do you spend on insurance for your car per month and year? I'm going to use $1200/yr as a nice example. Month after month after month you pay for insurance whether it's liability, collision or whatever insurance coverage you have. And you pay it subconsciously. Month after month; year after year. If no accidents occur, how much money does the insurance company return to you? You would be correct if your answer is ZERO. Let's take it a step further. After 5 years of paying for car insurance, if you don't get into any accidents, how much money does your insurance company pay you? You would be correct again if your answer is zero.Two points for you!!! :) You, the insured would fall under the asset column of the insurance company while the insurance company would fall under you as a liability. And we do this subconsciously every month like clockwork. From now till whenever you stop driving. This is just one example.
Let's use real estate in our next example, shall we? I once asked a server I recently worked with who had just purchased a new home if her house was considered an asset or liability (she also had a real estate license and I had recently finished a Robert Kiyosaki book). So I was doing the whole 'polling thing.' Her response was asset. My question to her was,"how so?" She explained that the equity she would build up over time would be considered an asset. Cleary an asset can build over time. But she failed to recognize a basic point: money or value that ends up in your pocket is an asset. So until the home is actually sold with enough proceeds to put in one's pocket, it is a liability. Until then she's, paying the mortgage for a huge liability, and one that has to be insured for some time. Clearly a mortgage that is paid monthly is a HUGE liability. The only time a home is considered an asset is when the mortgage and expenses is less than the rent collected. Now we're just talkin about the basics as seen in the diagram below.
So think of the asset/liabilty relationships that currently exist in your life? Trust me there's more than you think. Don't worry... I'd like to help, but you'll have to wait for my next posting.... NAH!! Let me start now. Car, car insurance, a home if you have one, cell phone(s) for you and your family, cable, internet, gas, and electricity (just to name a few). We won't get into banking and credit cards. YIKES!!! And sometimes it's you're significant other (Yep! I said it!). From here things will get pretty interesting and a lot of people will have a hard time accepting or swallowing the TRUTH. But it will be my pleasure to serve it to you and anyone else who takes the time to sit down and digest it. The simple premise is this. If it takes money out of your pocket it's a liability. If it puts money in your pocket it's an asset. Robert Kiyosaki explains that the trick is to turn your liabilities into assets. The secret is anyone can do it. You just have to know how. I bet I know what your next question is!! How do we do that Danny?? That's a GREAT question!
Simple. Somehow, through either becoming a business owner or entrepreneur, you can turn items like the ones discussed before into small puddles of profit or assets almost immediately. Imagine a leak that has small droplets of water dripping into a bucket. What will happen eventually to the water driiping into the bucket? The bucket will start to overflow. This represents droplets of money/income dripping into a bucket. There's ways to do it... LEGALLY of course, trust me on that one.
Liabilities ALWAYS cost you money throughout your entire lives. Assets simply provide income or ROI (return on investment). It's not always easy to understand this concept initially. The real AHA moments come to you as you go about your everyday lives. (But once you can truly appreciate it especially after a few of Robert Kiyoski's books). When you can begin to apply principles to your life that are so beneficial and of great value, that you will want to kick yourself for someone not showing you or explaining this information to you sooner. My personal favorite Robert Kiyosaki book, hands down is Conspiracy of the Rich. I LOVE this book and how simple it was to understand. I remember feeling disgusted and enlightened all at the same time.. pretty incredible if you ask me.
As you can see our country is struggling with a recession and unemployment. You hear about a lot of entrepreneurs in the news advising our future young leaders to not attend college. Do you think there's a valid reason behind this and this asset/liability relationship? You also hear about the greatest shift in wealth the world has ever seen. Do you know what that means? Do you know what industries they're talking about? I know what they're talking about... if you care about your future you should know and understand what they're talking about too. What does your future look like?
What does you're job look like? Is it the same ol same ol you see everyone posting on facebook everyday.The same people who constantly complain but don't change a thing in their lives. The same ol same ol that's sooo old it doesn't have a 'd' on the end o the word; that same ol?
We need to change, and believe it or not it starts w/the person reading this post. They say knowledge is Power. I like to phrase it differently. I believe knowledge is potential. You have the potential to change the course of your life. And it can start with something so simple as a book. Put a lot of potential assets in your hands today! Click on one of the links to Amazon or go to your favorite bookstore and pick up any of Robert Kiyosaki's books today! You might be amazed at what you learn.
Please take a second to click on a link for 1 of your social media sites and leave a comment below so we can share and spread the wealth. It would be greatly appreciated. God bless!