Home » The difference between Assets and Liabilities explained in most simple way!

The difference between Assets and Liabilities explained in most simple way!

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

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