In addition to my summary of Rich Dad, Poor Dad covering all 6 Lessons from the book,
I wanted to explain the concept of Assets and Liabilities in more detail.
Assets increase your wealth, while liabilities cost you money.
And Robert Kiyosaki concludes that what makes the rich richer and the poor poorer is that
the rich spend their money on assets, while the poor waste their money on liabilities,
which they think of as assets.
Let me give you an example.
A poor person, who's been sold a Bilzerian life-style as true happiness all their life,
might think, owning, driving and maintaining a Lamborghini is an asset.
Now, no one denies that they aren't fun, but all they do on the financial side of things
is cost you money, lots of it.
So, the shiny car, the newest smartphone and brand clothes and the great mansion with all
the playboy bunnies are a liability.
Haha, I know what you're thinking.
Those are some great liabilities to have, but only, and this is the point, if you got
a surplus in income.
A rich person might enjoy those liabilities, but they understand that what ensures their
crazy lifestyle is assets like owning a building, having cash on hand or on deposit, corporate
stock, equipment, inventory, mutual funds and even your own piggybank.
Whereas the middle class might try to live a similar lifestyle through mortgages, consumer
loans and credit cards.
The beautiful home, then, becomes a great liability, instead of an asset.
Most people work almost all their lives to pay off their home.
They've got expenses like maintenance, utilities and property tax.
Plus, the value of their house can depreciate over time.
For another example, let's look at the taxation system, which, as you surely know, affects
the middle- and upper middle class the most.
When you run an organization, which is a great asset to have, if it makes lots of profit,
one of the things maximizing your earnings is, that you are allowed by regulations to
first spend on your expenses and pay your taxes after deduction.
Wheareas people without assets are taxed on more than half of what they earn and spend.
I've mentioned "making the system work for you" in former videos.
Robert Kiyosaki's version of that is "making money work for you."
And you can start right now, take a little piece of paper, write down "asset or liability
- question mark", put it in your wallet, wrap it around your bills and the next time you
grab that wallet before making an impulsive buying decision, simply ask yourself "Is this
product or service, I want to spend on, an asset, meaning it will help me make more money,
thus it is a mid- or long-term investment or is it a liability and I will only lose
money?
That little paper will serve you as a reminder that you are not careless with your money.
If you can make this a powerful habit, that sticks with you for the rest of your life
or atleast until you're wealthy, you're effectively going to operate as a small-time investor,
have a careful eye on your expenses and spend your money only on products and services worth
buying.
Speaking of habits.
As always thanks for watching and subscribe for my upcoming review on the Power of Habit
by Charles Duhigg, one of my favorite books.
Talk to you soon.