The difference is quite simple.
The rich invest in assets. The poor invest in liabilities THAT THEY THINK ARE ASSETS.
Most people haven’t studied Economics (I sure haven’t!) and most do not hold a Finance degree. And not everyone is an accountant or a lawyer, so herein lies the problem.
People do NOT understand what assets are and what a liability is. People think assets are something that makes them look good and that liabilities are something that can kill you. They aren’t too far off on the liability section but WAY off on the asset dept.
Let’s take a closer look, shall we?
An asset puts money into your pockets
There are ONLY 5 types of Assets in the world.
- A business/businesses that a person owns
- Commodities, such as gold and silver
- Intellectual property such as books, games, coaching programs
- Real Estate, whether investing in commercial or residential property
- Stocks in small startup companies, shares in companies that have gone public (IPO) and CD’s.
An asset’s JOB is to drive home THE MONEY. It’s an income generating ATM from which you’re able to enjoy the best of life and provide for your family. An Asset gives you financial and time freedom. An asset means money works for YOU, not you slaving for it. An asset means you don’t wake up in a cold sweat worrying if you’re going to be broke and homeless. Rich people SOLELY HAVE ASSETS.
A liability takes money out of your pocket
Assets are VERY well defined but Liabilities are the sort of (ish) grey area. There are MANY liabilities that people incur over the period of their lifetime but the list goes on as follows
- A mortgaged house. You’re nuts to have a house that belongs to the government and not you.
- Car loans. In a bid to “look rich”, most people end up at the financial red line.
- Student loans. University isn’t necessary, wasn’t for me. You incur 30,000 pounds ($63,000) at the end of your degree… Classy! And this goes for ANY loan in general.
- Your job. Your job is the BIGGEST liability. From Jan-May, you’re working for the government. They take your money without YOU ever getting to see it. There is no such thing as a “safe, steady and secure job”. You don’t know the fate of your job and you can be fired tomorrow. How’s THAT for a good night sleep?
- Your spending habits. Poor people who get more money are steeped heavily in debt. Rich people invest.
A Liability’s JOB is to make you homeless and broke. It is the blood sucking needle in your arm that drains you of your time, happiness and love. A liability ensures you stay depressed, miserable and helpless. Poor people SOLELY HAVE LIABILITES.
So, where do YOU stand?See some words or phrases that you don't understand? Check out The Dragon's Lexicon.