Assets and Liabilities

 Generations of Financial Freedom enthusiasts are influnced by Robert Kiyosaki's book "Rich Dad Poor Dad".

It's a must read even today to firm up your thoughts about FIRE (Financial Independance / Retire Early).


Robert Kiyosaki, the author of "Rich Dad Poor Dad", has a different definition of assets and liabilities compared to the traditional accounting definition. 

According to him:

Assets are things that put money in your pocket, i.e. those that generate positive cash flow, rather than just things that have economic value.
This includes rental properties, businesses, stocks that pay dividends, etc.


Liabilities are things that take money out of your pocket, such as a car, a primary residence, or other depreciating assets that require you to make monthly payments or incur expenses.


Kiyosaki argues that many people mistakenly consider their primary home as an asset, when in fact it is a liability because it does not generate positive cash flow.

The key to building wealth according to the "Rich Dad" philosophy is to focus on acquiring income-generating assets, rather than just accumulating possessions that do not contribute to financial growth.

These income-generating assets are key to building wealth and achieving financial independence. 

With the surplus from salary that you pay yourself first, with every bonus and other additional income you receive, you must keep adding more income generating assets.

The income generated by these assets is called passive income as you are not trading your time for this.

Money works for you.

When the passive income exceeds your expenses and when there is considerable surplus to keep adding more assets to offset inflation, you are ready to retire.
You would have achieved Financial Independance.

Financial Independamce means, you donot have to work for money.
Your time is totally yours.

Also, you are financially independent if and only if you are not beholden to debts.

Next: Inflation - A monster

Or 

Previous: Understanding the terms: Cashflow, income and expenses

Or

Visit Home Page

Please do not forget to check the references.