I know so many people who are confused like me to differentiate between what is assets and what is liabilities. Last night I was reading a book called Rich Dad Poor Dad by Robert. T. Kiyosaki. It’s a finance book and he wrote this book in a so simple way. That anyone can relate to it.
So, here I’m writing some stuff that I learnt from this book.
- Asset : An asset is something that puts money in your pocket whether you work or not.
- Liabilities : A liability is something that takes money out of your pocket.
Cash-flow pattern of an asset and Liabilities :
- This is the simplest way to identify asset and liabilities. Now, you can easily understand through this image that how asset and liabilities work.
Cash-flow pattern of people who work for liabilities
Cash-flow pattern of people who invest in their assets
- All these diagrams have simply show you the difference between asset and liabilities.
- It is the cash flow that shows you how a person handles his assets and liabilities.
After reading this part of the book I understood that I was seeing money wrong way. All my life I was running behind house, car loans, clothes, luxury that gives me the short-term pleasure but I was digging a hole of debt.
But, from Now I have decided that I’ll work on my assets to save myself from future debt.
P.s – The diagrams are taken from the book Rich Dad Poor Dad by Robert T. Kiyosaki