It’s so easy to not look at the bigger picture and just work day to day, instead of looking ahead and planning something like this. It’s making me think!

Thanks

@Monica – The problem when you sell your home for a profit is people in most cases want a bigger home, so rather than making a profit any additional money is plowed into the new one and then some. Only people who downsize or inherit realize the profits from a primary residence. Second homes on the other hand are better investments. I think you are right I should stick to the word “investment” rather than asset.

@Bunk – How kind, thanks

@Erica – Thanks, you put it better than me. I love the quote, fantastic

@Adam – Glad you like it. I guess it is ringing true for people because this is the situation I find myself in. From the heart as it were

@David – Good advice on the small investments. Just getting started might be all the mindset shift we need.

I used to be in the #2 area, but has recently started heading more toward #1. Hopefully, I can start finding some good investments and start making money, rather than just saving money.

For what we’re talking about, I would use the definition that anything putting money into your pocket is an asset — anything taking money out is a liability. So even if the house is paid off, it still takes upkeep, has propety tax, etc., so it’s technically still a liability if we use that definition, which Kiyosaki and others in the game do use. (Of course this means kids go on the liability side when you use that definition, but it does make a good point.)

The bigger question though is: What are your assets doing for you? In other words, if the mortgage is paid off, and the money (value) is sitting there doing nothing for you, then it is under-performing. (In the Dairy analogy, it’s like the cow that’s not providing milk any longer.)

The biggest help with all this in my own road of financial wellness came when my mentor, L.L. (I mentioned her in the prior post) said so eloquently, “Get off your lazy assets!” In other words, take that equity back out of the house and put it to work for you with performing assets…yes, you pay on the equity you borrow (good debt) but you go find investments that outweigh the price you pay…

Okay, rant over:) Hope it is helpful.

Sure. Assets are things you own. Liabilities are debts. A house and a car are both assets, but a house is usually a good asset because you can often sell it at a higher value than you bought it for and make a profit on it. A car is an asset that loses value over time because of wear and tear and depreciates in value. It’s an asset that you use up after a certain period. A liability would be a credit card payment, a loan or mortgage payment, etc.

I think you use the word asset when you really mean investment, and liability when you really mean expense.

On a side note – I am by no means an expert on this. I’m just an MBA student at the University of Chicago that blogs and reads lots of blogs.

The clarification helps, but it’s strange to redefine common terms. I appreciate you took my comment as constructive as I was not trying to degrade your writing in any way. Thanks for being a responsible blogger and taking my comments into consideration. On that note, I’ll shut up, because this article is not about accounting definitions and I’m sure you don’t want your comments to turn into a discussion of accounting definitions.

Cheers!

If the bulk of it is still a loan, and it is for majority of people these days I think, then it definitely behaves like a liability. You can’t get the asset’s worth if you sell the house, at most you can sell the difference of maturity, which could be negative as we are seeing soon, and the portion of principle which you might have paid off already, if at all. Same goes for a car loan, as opposed to already owning the car which you can sell.

I am no accountant, but I am hoping this agrees with accounting notions.

@Monica – Thanks for the feedback. What would be the correct definitions? Can you help me correct the terminology? I have tried to change the wording to make it clear my definitions are not the correct accountancy ones

I generally like your blog, and I think you are trying to make some good points here, but I’m very frustrated with your usage of assets and liabilities. The definitions you have given are not correct from an accountant’s perspective. A house is definitely an asset, despite the fact you need a place to live. Because of your reputation, I am afraid people will take this information for fact when it’s incorrect. I hesitate to criticize, but I think the post could be very effective without the incorrect use of terminology and your point is getting lost in the fact that you are providing wrong information.

I still enjoy your blog and have great respect for you as a writer.

A slight point on Donald Trump, if I am not mistaken his business, or some of his businesses, were on the verge of bankruptcy, but not him personally. He was far from broke himself and living it up, and that just speaks to your points even more I suppose

@Jen – Me too, I need more dairy and less beef in my diet

That was very insightful.

@Jack – Yup, you can either eat a cow or milk it

@Matt – Good point, even better if you can build it then replicate your success

You’re right, most just advise to pay down debt and consume less – and that’s a fallacy if you want to make more moolah!

It’s essential to put your money to use, whether that’s by running a company yourself or having someone else do it for you (i.e. buying stocks).