Build Your Assets

“If you want to be rich, simply spend your money buying assets.” – Robert T. Kiyosaki

A fundamental factor that differentiates the rich from the poor can be found in their patterns of spending – namely the accumulation of assets versus liabilities. To put it plainly; rich people generally spend their life buying assets whilst poor people continuously purchase liabilities. An asset is anything you own that puts more money into your pocket or bank account, and a liability is anything that you own that continuously takes money out of your account.

One of the dimensions of becoming more valuable as a person is that you become more astute in your financial literacy. That means that you understand the impact of where your money is going; after all, you’ve worked hard for your money so why shouldn’t you learn to make your money work hard for you? That’s why it’s not uncommon to see individuals and families still struggling to make ends meet after 5, 10 or even 20+ years. It’s not that they’re not hard working – many of them are some of the hardest working people you’ll ever meet, but very often we either haven’t been taught or haven’t been diligent in learning how we can become more financially literate.

When you receive your income, be it weekly or monthly you’ll undoubtedly have the basic necessities of life to cater for – food, utilities, transport, etc. But what happens after that? Are you building up assets or liabilities? Below I’ve listed examples of some of the assets and liabilities that can have an effect on your wealth:

Assets Liabilities

Property and Real Estate
Stocks
Bonds
Intellectual Property (patents, royalties:music, books etc)
Savings
Businesses
Financial Education

Credit Cards
Mortgage
Loans
Ignorance

Think about these areas. How much of your income do you spend on increasing your assets? How about your liabilities…are they decreasing or rather increasing each month? As you can see the types of assets and liabilities you can have differ. At the same time they also bring varying rewards. For example, a savings account is seen as a low risk asset because it puts money into your pocket with little danger to the investor. But the percentage of interest received is very low at perhaps 3-5% per year of the deposited money. Owning your own business on the other hand can yield thousands of percent more to your initial investment but at a much higher risk. The business might not take off or could end up costing a lot in time and effort if things aren’t successful. And also in the area of liabilities not everyone will agree that a home is a liability. But I’ve put having a mortgage as a liability because it generally continually takes money from your pocket. Usually, the bigger the house, the higher the mortgage, utility and maintenance costs. Yes it could be argued that it is a ‘smart liability’ or a long term asset as you can gain equity from it and often it can be a wiser choice than renting a house. But it all depends on what your plan is once you own the house. You know it’s an asset when the purpose is to sell or rent it to make a profit.

Think on these things. You must begin to analyse your spending so that you’re building your assets and lightening your liabilities.

God bless and protect
Chidi

www.thetotalman.com

Quote of the week:
“The trouble with the rat race is that even if you win, you’re still a rat.” – Lily Tomlin

 

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