Assets Vs Liabilities, Know the dissimilarity

Homes For Rent In Murfreesboro Tn - Assets Vs Liabilities, Know the dissimilarity

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Learning the dissimilarity in the middle of assets and liabilities was a paradigm shift for us. If you ask an accountant or a banker to justify your balance sheet, here's what he or she would probably show you:

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Homes For Rent In Murfreesboro Tn

Balance Sheet

Assets - Home, Car, Boat
Liabilities - prestige Cards, Ious, College Loans

This is what we were taught growing up. You hear the advice that you should buy a lot of assets in order to increase your wealth. That's great news because who wouldn't want a home, a car, and a boat? So, before my wife and I got married, we signed for a house and we already had two cars. All we needed was a boat.

The irony here is that if accumulating these assets are good, then how come they seem to cripple people financially? The issue here is that what we were taught were assets aren't categorically assets. They are liabilities.

After reading the book Rich Dad Poor Dad by Robert Kiyosaki, we learned that if you ask the rich to justify a balance sheet with the same items above, they'd show you this:

Balance Sheet

Assets
Liabilities - prestige Cards, Ious, College Loans, Home, Car, Boat

Notice the red items. What once were assets in our mind has shifted over to be liabilities. This is an "unconventional" way of defining assets and liabilities. The dissimilarity is simple.

Assets put money into your pocket. Liabilities take money out.

So let's take your home for instance. The mortgage on the home is the liability. You pay the mortgage monthly, which is money leaving your pocket. You receive no earnings from your home. This is why it is a liability.

But then the demand arises, "What if I pay off my home, is it an asset then?" Not likely. Because you still have to pay asset taxes and maintenance. Money is still leaving your wallet. You either have to sell your house or refinance to receive any cash.

"The fact is, when a banker tells you your house is an asset, they are not categorically lying to you. They're just not telling you the whole truth."

-Robert Kiyosaki

Now, if you have a asset that you are renting out and the monthly rent produces sure cashflow (money leftover after the expenses are paid, like the mortgage), then the asset is an asset. It's putting money into your pocket.

My wife and I have a real estate asset in Tennessee. After the expenses of the mortgage, taxes, insurance, and asset supervision are paid, we have a sure cashflow of . It may not look like much, but come tax time, we can depreciate this asset and take other tax deductions.

What about your savings account?

Your savings catalogue looks an asset because it is earning you interest. So, on your bank's balance sheet, it's a liability to them. However, remember that it may not be holding up with the rate of inflation. This can be eroding your wealth. Now, I'm not saying that it's bad to have a savings catalogue or an crisis fund. But, just consider the fact that it may be taking money out of your pocket.

So what's the goal here?

The goal is to have enough sure cashflowing assets to generate enough earnings to cover your expenses. When this occurs, you can pick to either leave your current work or stay. Your assets should be on autopilot, with small or not involvement from you. This is financial freedom.

I hope you have new knowledge about Homes For Rent In Murfreesboro Tn. Where you can offer utilization in your life. And most of all, your reaction is passed about Homes For Rent In Murfreesboro Tn.