Do you know the difference? Are you sure? Let’s dig in a little here really fast.
Ok, so many people think they know what this is and others have no idea. So I thought I would break it down for you a little here so you are sure of the difference. A great book to read on this is Rich Dad Poor Dad, just FYI.
ASSETS
This is anything that goes up in value and cash flows (makes you money monthly). For example, you can have a rental house, it’s going up in value and you are collecting cash flow or should be. You should always charge more than your mortgage on it and refinance every 5-10 years at least. This way you have enough for repairs and net profit.
Net Profit is when you pay everything and what is left over for you. This is Cash Flow.
What Assets are not. Your home, your car, your boat, your bike, your TV, your Playstation or xBox, your purse, your dress, your shoes, you’re… fill in the blank of anything that is not going up in value nor giving you cash.
Why do we want Assets? Because this is a huge way to speed up becoming Financially free. For example, say over 5 years you work up to 10-15 rental houses that cash flow $400-500/mo then you will have around $6,000/mo coming in that you do NOTHING for other than occasionally get a call to fix things. Even here you can hire a property management company. Even better, in some states, you can do Lease to Buy or Rent to Buy, then they have all the responsibility and pay more a month.
Be sure to be on the lookout for my Good Debt vs Bad Debt email. All of this is covered in my course and the real estate investment course will be an advanced course coming soon. Some really fun stuff once you start learning about wealth and get through the foundations of money.
Remember to if you do a 15 year fixed (which you should), that in 15 short years not only did your cash flow but someone paid off your house and it is worth a lot more. Pretty cool stuff. That’s Money working for you even in your sleep. Someone else is going to work to pay you.
LIABILITIES
These are things that go down in value. Meaning the minute you buy they start costing you money. Your $1 turns into $0.50. Your home is a liability even though it is going up in value, you are spending money out of your pocket for it on the mortgage, repairs, upkeep, insurance and you are not getting cash flow. It’s more of an investment (hopefully). Remember even in down times people need to rent so it still cash flows, unlike your home.
Other Liabilities would be cars, toys, boats, things that take your money and do not give you more back. A lot of people think they have to or deserve a certain lifestyle and spend a lot on things that bring them very little value with few exceptions. Now don’t get me wrong, I want you to have fun, buy things, go on vacations etc… but I want you to do it with other people’s money, money that comes out of your assets, and you should be only using a percentage of it.
We all have and even need Liabilities, right? I mean you need a car to go to work, clothes, even a TV for downtime. But the idea is to limit these until the Assets outweigh (are more than) the liabilities. So if you have $6,000 coming in every month, spend 10-20% ($600-1200) and put the rest into savings, investments, repairs, etc… I’ll break all this down in my advanced courses.
Remember to get wealthy you have to learn what the wealthy know and change your money blueprint. New Knowledge = New ways of thinking which = change and that brings = Money which = doing what you were called to do in life and living life on your terms and what God called you in your heart to do in this one life.
Have you checked out our Online Course to help you not only become debt-free but also start learning how to build wealth? Check out The Ultimate Guide to Foundational Wealth by clicking here