The Real Definition of Assets and Liabilities According to the Wealthy



Is your Car really an asset or it’s just a liability?

Think about it, automobiles today may have transitioned from luxury to a necessary means of commuting. This means it is more likely to be an asset instead of a liability, right? …right? Sorry to burst your bubble, but it might not be an asset for most people. Before we start classifying which of our belongings are assets, we have to truly understand this; what are assets and liabilities? You would be really surprised how the wealthy would classify them.

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So in Accounting 101, we learned that assets are simply something that is owned by a person, company, or organization. This simply tags property as assets since they undeniably hold value. However, the rich and wealthy have a different perspective when defining assets and liabilities.

I once had the opportunity to have a discussion with the Chief Executive of Stanlib Investments Management Limited, on finance. Considering his position, he has dealt with so many wealthy men in Africa, who sought to invest their millions of dollars. When it came to assets and liabilities, the wealthy shared a similar definition.

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Anything that brings money in, is an asset. Also, anything that takes out money is a liability” I’m not going to lie, I thought the same way you are thinking now. It sounds like a really vague definition. Regardless, I still made that sink in for a little while but it was so obvious I was lost considering my obvious look of confusion.

You are lost aren’t you?” he asked. I stuttered a bit in my reply, but then he cut me off saying “Look don’t think too deeply about it. You drove here so I’m just going to use your car as an example.” That’s when he threw this thought-provoking question; “Is your Car really an asset or it’s just a liability?” That’s when it hit me…

Cars are very relatable examples since it’s one of the most common properties in our world today. They can be either tagged as Assets or Liabilities. As a liability, they take out a lot of money from our pockets for fueling and everything concerning maintenance costs. As an asset, our cars take us to our workplaces to gather more work time for productivity.

Or, it could simply be a service car like an Uber which brings direct income. Vehicles are sufficiently strapped with qualities of an asset and a liability, so all you have to do is to weigh out both options to find out if it’s strong as a liability or an asset. – Does it bring in more money than it takes out?

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The wealthy are critical with this principle in regards to owned property. They do their best to make most of what they own, serve as assets instead of just “property”. It is a simple principle to apply in your financial life if you wish to be not just rich but wealthy.

So, I’m going to directly pose this question again but this time for you to ponder on. Is your car really an asset… Or it’s just a liability?


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