Robert Kiyosaki's group has an on-line mini training series defining income and expenses, assets and liabilities. It's simple yet powerful when we really apply the concepts.
What we middle class folks and lower middle class always miss is the distinction between assets and liabilities. What we think as assets are actually liabilities that increases our expense rather than increase our income.
The Law of Accumulating Wealth tells us that as we progress in life, our aim is to accumulate assets. Assets which will in turn produce passive income for us.
However, many indeed commit violations on this law simply because they do not know or failed to understand.
Let me give you concrete examples:
We buy an apartment or a condo or just a parcel of lot with the idea that it is an asset without doing the math as automatically our mind tells us that properties are assets as taught in classes in schools. However, it is only if the net of buying the property and the use or renting or selling is positive that indeed what we bought is an asset. In short, if you make money from buying a property, it's an asset. However, if you buy it and there is no return to your invested money, then it is purely a liability.
Another thing a middle class buy is golf share. You pay a lump sum and every month you pay membership fee. I just had a walk to our golf club house and saw the monthly payments for members with their consumables. Minimum I saw was 2500 per month. On top of the money you initially cash out, you have this monthly expense. If this expense gives you returns by getting business from this golf share and membership, then it is an asset. If not , again it is clearly a liability. And here is the death blow: to be able to enjoy this golf share you have to spend even more...
Another one is a vacation time share. You pay large sums amounting to several hundred thousands and then pay a yearly amount for your units maintenance. If it is a local timeshare you pay in pesos but if it is international you pay in dollars not just several thousands but several tens of thousands. If you don't use it, and or rent it out then it is another wasted "investible" fund. Another form of liability which drain money from you instead of helping you accumulate assets.
These examples clearly violates the Law of Accumulating Assets. I know as I did commit all of the above three mentioned and those were hard lessons. And I had paid the price. And there are many other things out there that seemingly look like an asset but deep within is really a liability.
We have to have the knowledge, the financial literacy to know so we can avoid violating the Law of Accumulating Wealth.
My final point is this. If you feel good and is able to help others by buying liabilities rather than assets, or if you are able to give love and make your family enjoy life, it is a good price to pay as in the end what matters most in really not the money you accumulate or spend, but the relationships you had made as the Law of Accumulating Loving Relationships supercede Law of Accumulating Wealth.
More of this in my other blogs.
God bless!
No comments:
Post a Comment