If you are looking to pull yourself out of the ‘trading time for money’ model, then you will need to know the differences between an asset and a liability. There is nothing wrong with exchanging your time for money if you enjoy what you’re doing, for those of you reading that don’t enjoy what you’re doing then start to build that asset column. Layer on as many assets as you can.
Broken down in its simplest terms;
✅An asset is something that brings in money.
I explain it to my young children like so “an asset puts money into your pocket”👍
❌A liability is something that costs you money.
I explain it to my young children like so “a liability is something that takes money from your pocket”👎
The wealthiest and most successful people have a strong base of assets. They understand how building of assets and compounding of those assets improves their wealth.
Assets can be successful businesses, artwork, stocks and shares, cash and of course my personal favourite PROPERTY (or real estate for my friends in the US) 🏠! Property has provided me with monthly cash flow for many years now 💰💰💰
I have invested in property for close to 20 years because of the returns. Just on a side note cash can actually be seen as a liability because it loses value each year due to inflation. So, if you listened to your parents growing up who said, ‘save your money’, it was good advice but also bad advice too. Owning your own home is also a sticky point, some investors think it’s a liability, others an asset.
There are many books out there explaining what an asset and a liability is but if you haven’t read Robert Kiyosaki’s Rich Dad Poor Dad, then make sure you do. It’s a foundational book for understanding investing and wealth creation. Or just google ‘asset’ and ‘liability’.
Liabilities are any type of bad debt. If you don’t know the difference between ‘good’ debt and ‘bad’ debt, then do a bit of research. Let me know what you come up with. In simplest terms;
‘Good debt’
Taken out for investing purposes, for instance a mortgage on a property is good debt because you are benefiting from the debt, you receive monthly rental income and capital growth (not as linear as rental income). With a business it could be investing in a new machine that will increase production which in turn will increase ££££. Just remember that good debt should be putting money in your pocket. Good debt should bring in more money than it costs.
‘Bad debt’
Consumer loans, car finance etc. They tend to not put money in your pocket or help improve your wealth. The wealthiest people have their assets pay for their liabilities.
Obviously, there is a lot more to this than the very very short description above but if you are serious about being successful then you need to know the difference between and asset and a liability. I will be able to help so get in touch.
Lots of HIGHLY successful people say ‘You can’t save your way to wealth’ they then explain that you should always INVEST your money so that it grows for you. Have a look at what Mr Warren Buffet does with his investing.
A lot of this like most things in life is down to your MINDSET. Get your Mindset sorted and you’re on your way. I can’t remember where I picked it up from but ‘the skill set without the correct mindset will leave you upset”.
Keep taking those daily steps forward everybody, if you wanted to find out more about my Unique Mentoring programme and how you will benefit then contact me on DervishMentoring.com – good luck! 🥋👊🏠
p.s. There is nothing wrong with having liabilities so long as your assets are paying for them (after all that’s what money is for, it’s a tool to help you in life).