Knowing the difference between assets and liabilities is the first step towards getting rich
If you intend to be wealthy – you have to learn some basics of financial rules, which is the difference between assets and liabilities in your financial life.
Origins and liabilities are two well-known names in the world of money and wealth. Today, wealth and wealth have become the wish of every person more than ever before, although most people do not reach their wishes of wealth and money, what is the secret of that, dear reader? It is simply the assets and liabilities.
To shorten the way for you and get into the heart of the matter, what are the origins? It is simply everything that enters money into your pocket. As for liabilities, it is everything that gets money out of your pocket. Make the first your friend and quarrel with the second. Can you do that, maybe tell me how to live and not spend anything of the money … I don’t mean that dear .. Follow us to find out more.
Let’s explain more about the assets and liabilities, there is the famous saying in the financial world is (Do not work for money, but make money work for you).
The first is to make money work for you. It is the asset, and it is the method that the wealthy follow, and it is the path of wealth. While working for money, such as a job or profession, for example, it is the most common method, which is considered one of the liabilities and is the main source of livelihood and sustenance, and it is difficult to achieve wealth for its owner.
The first method – the job: the employee works for money because if he stops working, the money will stop flowing to him.
The second method – professional and service work: including doctors, lawyers, accountants, and others … and everyone who has a profession is also working for money because if he stops working or providing service, the flow of money will also stop, so whether you are a doctor working in your clinic or a lawyer working in your office, you are working For the sake of money, even if it stopped, the money also stopped. They are working for the money, dear reader.
The third method – investment: it means investing money in the stock market , for example. This work for the owners of large capitals puts millions in different companies and is waiting for the profits to be distributed while he is asleep.
The fourth method – commercial, industrial and real estate projects: building the project and building the administrative system, then the profits come to you while you sleep.
These were four examples, and there are many other ways to earn money now. What is the difference between them. Note that the owners of the third and fourth methods are the owners of the assets, because the money works for them, and the first and the second are working for money.
If you want to be wealthy, be sure to direct part of your income into buying assets. If you don’t, you will still be in the middle and poor population.
Why do the rich get richer?
Many people suffer from the increase in their expenditures as their monthly salary increases, and they wonder why they are still suffering financially even though they are making much more money than before. The reason for this is that after their salary increases, their needs and desires to live a more luxurious life increase, their standard of living rises, and they become more consuming of clothes and food, and they decide to have children more than what calls for buying a spacious house and a nicer car … etc.
Their standard of living has increased, and their expenses and financial obligations have also increased, so they returned to the point of zero as if the increase in salary did not occur in the first place, but they may have in some cases to borrow money in order to keep pace with these changes in their lives, thus making the increase in the salary a curse that did not happen.
“Making more money will not solve your financial problems. Rather, it may complicate them.” – Robert Kiyosaki
This can be illustrated by returning to the cash flow representation of Robert Kiyosaki. As the salary increases, the number of liabilities increases (house, car, children, taxes, discounts, debts, food, clothes …), while the number of assets remains constant.
On the other hand, the rich have many assets that enable them to bear all these expenses quite easily. They spend what these assets bring to them to live the luxury they dream of, and to pay financial obligations such as taxes, bills and other expenses, then they invest the rest in acquiring other assets that generate more money for them in the future. This explains why the wealthy get richer as time progresses, as they are engaged in a system that resembles a cycle that generates money on its own.
Why does the employee class suffer in its life?
Not because she isn’t getting enough money but because she spends all the money she gets on buying liabilities.
Let’s compare the treatment of the three social classes (poor, middle, and rich) with liabilities and assets.
First: the poor class: the
job generates a monthly income —– is spent on (housing, food, transportation, taxes …) and in the end
Second: the middle class: The
job generates a large monthly income – – it is spent on (housing, food, transportation, taxes …) and in the end
liabilities: credit cards, loans, installments
Third: The wealthy class
Assets generate a large income from dividends, rents, rights to exploit intellectual property – it is spent on buying stocks, real estate, intellectual property
Assets: Real Estate, Stocks in the Stock Exchange, Various Investments
These previous examples answer the questions of the poor class of employees whose salary has increased, but they are still suffering from the lack of money left for them. Getting more money in the salary will not solve the problem, but rather accelerate the symptoms of the financial crisis.
In short , the way you dispose of your income is what determines which class you will belong to. These previous examples explain the reason why the poor who suddenly fall into wealth return to the poor again? . The reason is that you must learn to manage your money
How do we measure wealth and wealth? According to the brilliant Buckminster Fuller (so richness is the answer to the following question: How many days can you survive if you stop working from today?)
Or in other words, wealth is the amount of returns that assets bring to you, compared to your expenses and expenses, i.e. the more money you direct to buy the assets the more The financial flow and thus will get richer and richer, God willing.
In the end, we summarize all of the above with the following two rules, so you should memorize them well if you are one of those looking for wealth and financial freedom
Liabilities are the things that take money out of your pocket.
Assets are the things that put money in your pocket.
In conclusion, dear reader, the concept of assets and liabilities has become clear, and you have become fully convinced to go from liabilities to assets. Because it makes money work for you.
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