3 Differentiating an Asset from a Liability


Assets and Liabilities
One of the many Personal Finance advocates' gifts to the world is sharing their unconventional wisdom regarding their approach to money and investing. 

Robert Kiyosaki, in particular, defined Asset and Liability in their simplest forms none of my Accounting teachers back in High School and College could have explained better (I hope my Accounting teachers forgive me!).


According to him (Kiyosaki), an Asset is simply anything that puts money in your pocket while a liability is anything that takes out money from your pocket. I told you it was that simple!
 
Given this simple definition, an asset could be anything in the form of a business, from which you can gain asset based loans, investment or simply, your own income. An income, according to Filipino authors Vic and Avelyn Garcia is a problem of other people that you were able to solve

That's why we have jobs. 

The company needs someone to compute the payroll, so they hire an accountant to solve that problem. They need someone to mop the floor, they hire a janitor to solve that problem. 

People from your place kept complaining about the long walk they need to take before reaching the bus terminal since no public transportation is available to take them there. You bought a jeepney to bring them to the terminal. You solved their problem. They now pay you. That's income. Your jeepney is an asset.

Likewise,
your problems that require others to be solved is an expense, which is a part of you liability. If you're thirsty and you opted a convenience store to quench your thirst, they solved your problem. You pay them. Money came out of your pocket.

You had your promotion and decided to loan a car. By driving your own car, you pay for the registration, insurance, gas, tune-ups, toll fees and parking among others. Money coming out of your pocket. These are expenses. Your car becomes a liability.

The house where you live needs a repair. You have a problem. You need a carpenter to fix your problem. You pay for the repair. Money came out of your pocket. Your house is a liability. 

You think you learned something today?

Make yourself a favor. Grab a copy of the book
Rich dad, Poor Dad now by Robert Kiyosaki and start your journey towards financial freedom!


PisoandBeyond


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3 comments :

  1. AnonymousMay 18, 2014

    like :) a little correction... *mop instead of map...

    ReplyDelete
    Replies
    1. sharp eyes! thanks for the correction ;-)

      Delete
  2. AnonymousMay 19, 2014

    ur wc... c lara smith nga pala to...

    ReplyDelete

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