Things Everyone Should Know In Relation to Liabilities and Assets
The majority of us believe that the more we labor the more riches we’ll acquire. Having said that, this is not true. Usually the complete opposite is the case.
Permit me to offer one example. It goes without saying that it is the poorest people nowadays who work the hardest. Try being employed in a factory for 7 days per week at only a few dollars an hour and you will quickly understand this.
Take a look at any affluent person you already know or know about. How much do these people actually work? Most likely not very much and if they do work tirelessly it is usually since they love doing it. The principle difference between the wealthy and the poor is always that the poor work tirelessly for hardly any cash but the rich have cash working for them.
The wealthy possess assets that generate them income while the poor possess liabilities that cost them money. To be a successful business person you must learn to acquire more assets and make systems that will generate income for yourself, not buy liabilities that will be expensive for you in the long run.
A good example I often use is the following: two men buy a high priced vehicle from the same garage at the same selling price. The first man drives it around for a few years and after having to pay thousands of dollars in gasoline, insurance and tax he eventually sells it (because he can no longer afford to run it) at a loss of an extra 20 thousand dollars. I know of some individuals that do this consistently.
The second man hires out the car to individuals for special events which includes weddings and other celebrations. After having his clients buy the petrol, insurance and tax for a few years he pockets the profits he’s made and trades in the vehicle for a much bigger one. Any costs he incurs are tax deductible. He then repeats the approach with his larger, smarter car and in a couple of years time has the ability to buy two cars, then three.
Several years down the road the first man made a substantial loss and is back riding his bike to work. The second man is now offering a number of classy cars that he hires out for money and has quit his job as a result of this.
So, if these men both began by purchasing the same type of car at the same price, what went amiss with the first man and what went right for the second man? It is very simple really, the first man turned his car into a liability, while the second man immediately converted his car into a money earning asset.
Next time you acquire anything of value bare in mind this example and establish whether your have an asset or simply a liability. Act like the second man whenever you can and you’ll be one massive step in front of your friends and associates who haven’t been fortunate enough to read this.
When you’re looking to purchase some more investments remember what you’ve just learned about assets and liabilities…
