What is an asset? The definition that Kiyosaki uses is something that brings value to you, and generates income. Our definition is something of value. In fact google shares leaking pockets definition for an asset. (smile) So, your car, clothes, etc… all rank as assets. However, these assets have little to no value in a lot of cases. Some assets even cost you money, which would make them appear as liabilities. None the less as long as they have value they still clear the asset column.
A liability to me is an assets that hasn’t been able to create equity or cash flow. But even liabilities are assets in my book. There is no such thing as a true liability. However, take this with a grain of salt it is possible to fill your portfolio with toxic assets which make them behave like liabilities. It maybe that this asset would be better served in another investors hands. A good example of a liability is credit card debit, it is hard to turn this into an asset but it does have value. However, the value is often times less than the cost. Which is the truest form of a liability even though it still is an asset just a bad asset.
For instance take a stock losing money. Does it then become a liability. Nope it’s still an asset it just isn’t cash producing or creating equity. Companies often times fall in this category making it easier to sell and turn it into another assets class i.e. cash, credit, stock…
Assets are also very subjective. For instance I hear people value their company at crazy rates. The fact is your a company isn’t just the value of the equipment it owns, or the amount of cash it creates, or profit it generates. These factors can be used to create a value. However, since it is subjective an argument can be made that your company values at several million dollars, even if the cashflow doesn’t substantiate it, or the balance sheet. Some value could even just be perceived. I heard an interview with trump where he said, “His company’s value is ranked at 6 million however he thinks it’s closer to 9 million”. This is a great example of how this number is not objective. The value of something is really what the market will pay. So, if I have a pair of old shoes I think are worthless but I miraculously sale them for 100 bucks. I have completely underestimated the value of that asset (imagine a shoe as an asset; which it could be).
Asset Accumulation is essential because we must accumulate Income Producing Assets to attain financial success. Income producing assets, like stocks, bonds, real estate, 401K’s and annuities provide passive income. Passive Income provides Financial Stability, Financial Freedom and eventually Retirement. Everybody needs to turn some of their Cashflow and Labor into Income Producing Assets. We provide ongoing training on Asset Accumulation Strategies. Our goal is to help millions of people attain financial success by acquiring More Cashflow and using Better Financial Strategies.