Rich dad says, "If you stop working today, an asset puts money in your pocket and a liability takes money from your pocket. Too often people call liabilities assets. It’s important to know the difference between the two.
“I can’t afford it.”
“How can I afford it?”
The statement “I can’t afford it” shuts down your thinking. By asking the right question, you mind opens up and looks for answers.
“The reason I’m not rich is because I have you kids.”
“The reason I must be rich is because I have you kids.”
“I’m not interested in money.”
“Money is power.”
“When it comes to money, play it safe - don’t take risks.”
“Learn how to manage risk.”
“Pay myself last.”
“Pay myself first.”
Rich Dad always took a percentage off the top of any income he earned. He put that money into an investment account that went toward purchasing his assets. Poor Dad spent all his money first and never had any remaining for investments.
Believed that the company you worked for or the government should take care of your financial needs.
Believed in financial self-reliance and financial responsibility.
Focused only on academic literacy.
Focused on financial literacy as well as academic literacy.
Learned only the vocabulary of academia.
Learned the vocabulary of finance – “Your words are the most valuable tools you have.”
“I work for my money.”
“My money works for me.”
Thought that making more money would solve his financial problem.
Knew that financial education was the answer to his financial problems: “It’s not how much money you make that’s important – it’s how much money you keep and how long you keep it.”
This is assuming the house is mortgaged, obviously. The house is shorthand for the mortgage. That’s one of the reasons I posted it. It’s a dire fallacy to see a house an asset if you don’t own it. It’s negative cashflow. The part about risk is also noteworthy.
Incorrect. In keeping with Kiyosaki’s definition, a “liability” is something that “takes money out of your pocket.” Even if you do not have a mortgage on your house, it is still costing you. Taxes, insurance, maintenence and overall upkeep, as well as any improvements you wish to make over the years…your primary residence takes money out of your pocket.
Unless you work some way of turning your home into a money-making business (e.g. you rent out rooms like Mrs. Gump), and the money it brings in meets or exceeds these costs, your house is a liability, whether you owe money on it or not.
Yes, I’m quite familiar with Kiyosaki and his works. Although I’m not sure what point you’re trying to make. An asset puts money in your pocket. A liability takes money out. If something is cashflow negative, it is a liability. Again, unless you’ve made some kind of business out of your house (literally meaning the house itself generates income, like if you rent out rooms for an amount equal to all the bills you have to pay on the house, for example), then your house is costing you money whether own it outright or not.
I thought you were being sarcastic. The game uses normal accounting. If you can sell something for a positive sum I call it an asset. Everything has “upkeep”. I.e., nothing lasts forever. I suppose you could consider the likely costs until the point of selling it in a more overarching view of asset/liability.
And my entire point was that that is misleading. “House” is not shorthand for “the mortgage.” Calling a house a liability is not assuming the house is mortgaged. My whole point was that (in Kiyosaki’s terms), the house is a liability regardless of whether there is a mortgage or not (again, unless of course the house generates an income from rented rooms or some other venture).
Hey! My Intro to Financial Accounting course is able to help! How a home is recorded, for financial at least- and it’s double-entry bookkeeping, is when you buy your house, your cash(asset) goes down by your down payment amount, but your assets (physical stuff- typically called what you want it to be called) goes up by the full price of the house. This leaves your assets exceeding your liabilities (ignore paydays unless you want to call them accounts receivable), but that mortgage you took out is entered under a liability.
Ex.) you buy a $100k house, $20k down, $80k on credit(mortgage).
This increased your assets(non-cash) by $100k, reduced your assets(cash) by $20k, leaving a net of $80k, which is the same as the liability of your $80k mortgage.
Why a mortgage may be considered a liability is that it is a collaterallized loan- ie your have to keep paying that special loan, or the bank kicks you out- like a car loan, or they take your car, etc.
In this scenario the house is of course worth more than $100 K - otherwise you would have kept the cash. To clarify, it is a liability in strictly monetary terms.
In this scenario the house is of course worth more than $100 K - otherwise you would have kept the cash. To clarify, it is a liability in strictly monetary terms.
Yes, I was just looking at the monetary side, not the actual, internal value- my mistake.
Here’s another reason why I don’t like Kiyosaki: He says that he doesn’t sell his “assets” because doing so would create a taxable event; thus, he prefers to hold on to the “asset” and receive its cashflow (dividends, interest, etc.). But those cashflows create a taxable event too!