Collection: Financial Literacy - #5 Robert Kiyosaki 'Most People Are Wrong About Asset & Liability'



[Transcript]

ROBERT KIYOSAKI 00:00

So let's begin with words here.


And one of the biggest words that people have a mistake on – wrong definition for – are these words here; Assets and Liabilities.


How many people ever heard people say my house is an asset? Good. That's using the wrong definition. That's the problem.


So I'll give you the definition, my Rich Dad gave me, you won't find this in a regular dictionary because it's very simple definition because this is the guide to wealth. A definition of an asset is something that puts money in your pocket whether you work or not. That's very simply it, okay?


So when you look at this financial statement, this is Income Statement and Balance Sheet, and there's one more form that basic accounting – I'm not accountant – but basic accounting requires, it's called the Statement of Cash Flow.


And what that shows you here is this, assets are putting money in your pocket. So for example I have a house and every month, let's say, I collect $100 from it after paying all my expenses, the house is an asset.


But if the house goes unrented and every month is now costing me money, that same house is a what?


AUDIENCE MEMBER 01:06

Liability.


ROBERT KIYOSAKI 01:06

Liability. So this is the cash flow pattern of a liability.


So when a person says their house is an asset, I then ask them, I say, is that house putting money in your pocket? They say, oh no but it's gone up in value. That shows lack of financial intelligence or financial IQ, okay?


I'm not saying, don't buy a big house, I'm not saying any of that stuff. I'm just saying don't call a liability a what?


AUDIENCE MEMBER & ROBERT KIOYOSAKI 01:29

Asset. And that's the problem is using the wrong word for the wrong thing here.


Or I could have a car; If I use a car as a taxi and every month and put $1,000 in my pocket, it's an?


AUDIENCE MEMBER & ROBERT KIOYOSAKI 01:41

Asset.


But I have my BMW here and it's costing me $1,000 a month, it's a?


AUDIENCE MEMBER & ROBERT KIOYOSAKI 01:46

Liability.


So that's very simply it. So don't call assets, [liabilities] or liabilities, assets and that's where people get in trouble.


(Source: https://youtu.be/0854UWAv8xA)

 

[YAPSS Takeaway]

An asset is something that puts money in your pocket and a liability is something that takes money out your pocket.