vacuum cleaner and your everyday dishes could be considered assets! Most accountants go crazy with this definition because they want to classify your shares of stock, your jewelry, your residence, your cars, and your mutual funds as assets. To me, none of these things have any value until the day you sell them. Instead, here’s the Rich Dad definition: An asset is something that puts money in your pocket, whether you work or not (2019, Kiyosaki). I go to battle with the traditional definition of a LIABILITY. Most accounting professionals will tell you that a liability is “an obligation to pay an amount you owe to creditors, be it an individual or an organization.” My definition begs to differ: A liability is something that takes money out of your pocket. One of the main reasons so many people are in financial trouble is because they refer to their liabilities as assets. In today’s financial crisis, millions of people are finding out their homes are not assets. The biggest fight I get into when I tell people your home is not an asset. We received a lot of flak for that, especially when times were booming and people were taking out loans against their homes, sometimes two or three times. It wasn’t until the real estate market crashed back in 2008 and people found out that they owed more on their house than it was worth before they started to understand their home was not an asset. If you haven’t suffered through this experience personally, then please take my word for it — you don’t ever want to be in this position. As my rich dad said, your financial statement is your financial report card. It’s a reflection of your financial IQ. The problem is that most people leave school not knowing what a financial statement is — so they are more likely to have an F on their financial report card. A person can go to great schools and get straight A’s on their academic report card but be a financial failure in terms of their financial statement. You won’t know where you stand on your pathway to financial freedom until you face the facts (2019, Kiyosaki).
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