How to see if I have assets or liabilities?

Our definition of an asset is still one that we use today: How to see if I have assets or liabilities?

“An asset, whether you’re working or not, is something that puts money in our pocket.”

Period. Simple.

If you stopped working today, meaning the salary stopped, from where would money flow into our pocket? Most people reply with “Nowhere.”

There’d be no money.

Here are some examples of the differences between assets and liabilities:

An asset may be a rental property that has a positive cash flow. It may be a business in which we invested that gives us cash flow every year/mont/week/day. It could be a stock that pays a dividend. The key is that it is an investment from which we receive money on a regular basis — it provides positive cash flow without being present to get the passive income.

A liability, on the other hand, is something that takes money from our pocket. So, if we stopped working, chances are our car would take money from our pocket each month through car payments, gasoline, and maintenance. Our home would take money from us each month in the form of a mortgage payment, property taxes, insurance, and upkeep. These all provide negative cash flow.

Here is the revelation we had when looking at the income statement and balance sheet.

But the key to financial freedom is to focus on acquiring assets.

Realized that the key to financial well-being is not to focus on acquiring income but to instead focus on acquiring assets.

When we made that connection, life became easier, both in my personal financial life and in our business — The Master Investor Company. We focused on acquiring assets personally and also focused on the assets we were building within our company.

We also began asking one important question: What new assets am I building today?

It’s simply a different way of looking at the world.

How many times have we wanted something — a new car, a bigger house, diamond earrings, a designer handbag — but told ourselves, “No, we can’t have that” because we couldn’t afford it? Perhaps we have consoled ourselves with reminders that “nobody gets everything they want in life” or “maybe someday.”

We once felt the same way.

For example, years ago, we found something we really wanted: a beautiful, 60-foot long sailboat. There were two problems: 1) we didn’t have the money for it 2) we knew that owning a boat was a giant liability! Or at least that’s what we thought.

But we really wanted that sailboat, so we began to investigate ways that would allow me to purchase the boat and turn it into an asset. Instead of just letting it sit in a dock in Hawaii and writing checks every month to pay for the maintenance and the loan on it, we put the boat into a charter company. When we’re not using the boat, it’s chartered throughout the Hawaiian Islands. The money from the charter business pays for the expenses of the boat. Ah, it’s so satisfying when assets and liabilities merge!

And the best part is that we get to enjoy the boat and the house whenever we want to, all paid for by the businesses we turned them into. Talk about having your cake and eating it, too!

At the end of the day, living this way is all about mindset. We think it’s terrible to tell people they can’t have what they want — what a horrible way to go through life!

By shifting our mindset from, “we can’t afford this,” too, “How can we afford this?” we can literally change our life.The liabilities we want can actually make us richer as we get creative in finding ways to afford them by creating or investing in cash-flowing assets.

The reason people get into trouble financially or never get ahead in life is because they have liabilities that they have been led to believe are assets.

One of the most important lessons we learned from rich dad was to know the difference between an asset and a liability.

Once we have got that down, we will realize that the strategy to achieve infinite wealth, where the cash flow coming in is equal to or greater than our monthly expenses, is very simple: Stop focusing on income and start acquiring assets that give you cash flow.

Today is the day to change our mindset about money. What is it that we really want and how are we going to get it?

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