Rich People Own Assets; Poor People Own Liabilities

Assets include stocks, bonds, mutual funds, index funds, real estate, and other tangible or intangible resources that produce value. If you own many assets, you can build your wealth over time because – as Robert Kiyosaki argues – assets put money in your pocket. Liabilities, on the other hand, take money out of your pocket. Liabilities are somebody else’s assets because money is leaving your pocket and going into their pocket. Liabilities can include cars, clothes, cigarettes, and any other purchase that costs you money and doesn’t give you return on your investment in the future.

Earning and saving more money and buying assets every month can make a tremendous difference in your financial health. Imagine buying less stuff every month and buying more assets. It literary can mean the difference between being rich and poor.

Real estate is a great asset to own because you make cash flow every month. As long as your rental income exceeds your fees (e.g. mortgage payments, taxes, insurance, and more), you will make money. On the contrary, the home you live in is not an asset, it is a liability because you still have the fees but no rental income. In other words, it takes money out of your pocket.