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Assets vs Liabilities

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KenDunlop

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It sounds like a lot of you have read Rich Dad, Poor Dad, that deals with the concept of Assets and Liabilities. Basically, an Asset is something that makes you money and a Liability is something that costs you money! It's that simple.

Inspired mostly by the book, I got rid of a lot of my useless possessions. I realized that most of the things I had, that I hadn't used for years, were not Assets and needed to be disposed of. I haven't regretted getting rid of any of it in the year since.

Using the paradigm of Assets and Liabilities has made me wonder what my assets really are. I know that my home isn't an Asset (I don't even own my own home). My possessions are not Assets. Question, is, what assets do I really have to show for the years I've spent working?
- Monthly savings from my paycheck
- Time
- My health
- Skills and knowledge

This had led me to think that of all your Assets, your knowledge and time are actually the greatest ones! If you took all of some tycoon's money, possessions, even their status as the owner of a company, what they'd have left is what they know and the skills they gained. They'd be rich again after a few years.

It's been rather humbling to realize how few Assets I've really gained from my years as an employee.

Anyway, I posted this because I'm interested in what other people have to say about Assets and Liabilities. What Assets do you think you have? How do you recognize an Asset? What Liabilities should you avoid?
 

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ljean

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Assets can be something that you enjoy greater than their cost & hassle. If you stick with a dollars & cents definition you'll find you'll have accumulated much and enjoyed little.
 

Luifer3112

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It sounds like a lot of you have read Rich Dad, Poor Dad, that deals with the concept of Assets and Liabilities. Basically, an Asset is something that makes you money and a Liability is something that costs you money! It's that simple.

Inspired mostly by the book, I got rid of a lot of my useless possessions. I realized that most of the things I had, that I hadn't used for years, were not Assets and needed to be disposed of. I haven't regretted getting rid of any of it in the year since.

Using the paradigm of Assets and Liabilities has made me wonder what my assets really are. I know that my home isn't an Asset (I don't even own my own home). My possessions are not Assets. Question, is, what assets do I really have to show for the years I've spent working?
- Monthly savings from my paycheck
- Time
- My health
- Skills and knowledge

This had led me to think that of all your Assets, your knowledge and time are actually the greatest ones! If you took all of some tycoon's money, possessions, even their status as the owner of a company, what they'd have left is what they know and the skills they gained. They'd be rich again after a few years.

It's been rather humbling to realize how few Assets I've really gained from my years as an employee.

Anyway, I posted this because I'm interested in what other people have to say about Assets and Liabilities. What Assets do you think you have? How do you recognize an Asset? What Liabilities should you avoid?
You are completely right. Your biggest assets are your knowledge and your skills.

Without them there’s no chance for you to create Financial assets.

In my case I have Great knowledge on Trading [Futures market/Stock market] that I could use in order to create my own asset.
 

KenDunlop

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Please don't listen to Kiyosaki when it comes to the definition of assets and liabilities.

His definitions are crap.

By his definition, if I handed you a billion dollars worth of gold bars stored in a vault, and you had to pay $100 per month in storage costs, that's a liability (it's costing you money every month, just like your house).

So, do you agree that a billion dollars worth of gold in a vault is not an asset? Because it's really no different than your house. Or your car. Or you dishwasher. Any of those things can be sold, and the money can be used to buy something else.

For example, you could sell your dishwasher and use the money to buy a few shares of a dividend paying stock. I assume you agree that the dividend-paying stock is an asset? So, if you can trade your dishwasher for an asset, clearly the dishwasher was an asset to begin with.

Kiyosaki's point is that cash-flowing assets are better than non-cash flowing assets. And in some respects he's right. In other respects, he's completely off base.

Long story short, an asset is anything that can be exchanged for currency. A piece of paper is an asset. Not a very valuable one, but an asset nonetheless.

A liability is anything that you'd pay to get rid of. Would you pay $10 to get rid of your mortgage? Then it's a liability. Would you pay $100 to get rid of your car note? Then it's a liability. Would you pay to get rid of your house? Of course not. It's an asset.

House = Asset. Mortgage = Liability.
Car = Asset. Car Loan = Liability.

By the way, if you're really convinced that your house is a liability, you should be willing to give it away for free to rid yourself of the liability. Are you willing to give your house away? If so, I'll take it... ;)
I see your point. Clearly the idea of Assets and Liabilities could use some development, that's why I started the thread really! A house clearly isn't a Liability in the same way that my old, useless possessions were or I'd want to get rid of them both.
If nothing else, I find the notion of Assets and Liabilities useful for taking a sober look at what's actually doing good in my life and what isn't. There seem to be many ways you could potentially define them.
 

Think Expand

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The terms assets and liabilities have been very well defined for hundreds of years.

The realization I'm guessing you've come to is that there are different types of assets, and the assets that might be right for you at this point in your life may not be right for others at their point in life (or right for you at another point in life).

The assets I own today (which are right for me today) are very different than the assets I owned 20 years ago (which were right for me back then).

Btw, as for your house, imagine it was completely paid off. Would you consider it an asset at that point?

If so, then you already consider it an asset...it just currently paired with a liability (the mortgage).

And just like some assets are right for some point at some point in time, it's the same with liabilities. The liabilities I have today are very different than the liabilities I had 20 years ago. And they were both right at the time.
The whole concept of assets is about the production of passive monthly cash flow.

If you work at your job by using your skills and knowledge, you are burning time and health to make money. The more you work, the more you spend time. Your income is linear, not residual.

But if leverage your knowledge and skills to create an asset like a business that run without you or invest in real estate or dividend paying stocks, you are creating assets that will produce passive monthly cash flow.

Without assets, regardless of the definition, you will never be financially free...you will work till death.

I will say don't focus on assets, but focus on increasing or creating more passive monthly cash flow.

Focus on PIG's ... Passive Income Generators

Money or gold is useless unless it is put to use to provide value for others and create assets that provide cash flow.

To clarify, there are two types of assets:

1. Non productive assets..no cashlow only appreciation in value eg. Cash and gold
2. Productive Assets...produce cash flow and appreciate in value eg. Business and real estate.

If you accumulate non productive assets like gold, silver etc, you will enjoy appreciatation and capital gains when you sell but ZERO passive monthly cash flow.

Accumulate cash flowing, income producing assets or productive assets that produce massive passive, recurring monthly revenue ....that is the key to financial freedom and the fastlane freedom. Thanks
 
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Think Expand

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That's not true.

It may be how you like to interpret what an asset is, but it's not an interpretation that holds up to scrutiny.

By this definition, a billion dollars worth of gold (that doesn't generate any monthly cash flow) is not an asset. And if it's not an asset, it's a liability.

Is that your contention? A billion dollars worth of gold is a liability?




Again, the problem with this thread is that people are defining terms based on their personal perspective and viewpoint.

Your comment above is flat-out incorrect for many people.

I could convert all my assets to cash/gold today, and I'd be able to live comfortably for the rest of my life without another penny of residual/passive income or cash flow.

Given that, it's hard to argue that my money is "useless"... It's gives me all the financial freedom in the world. No cash flow required.

I'm not saying cash flow is bad, just that it's not required for something to be an asset.
Look
That's not true.

It may be how you like to interpret what an asset is, but it's not an interpretation that holds up to scrutiny.

By this definition, a billion dollars worth of gold (that doesn't generate any monthly cash flow) is not an asset. And if it's not an asset, it's a liability.

Is that your contention? A billion dollars worth of gold is a liability?




Again, the problem with this thread is that people are defining terms based on their personal perspective and viewpoint.

Your comment above is flat-out incorrect for many people.

I could convert all my assets to cash/gold today, and I'd be able to live comfortably for the rest of my life without another penny of residual/passive income or cash flow.

Given that, it's hard to argue that my money is "useless"... It's gives me all the financial freedom in the world. No cash flow required.

I'm not saying cash flow is bad, just that it's not required for something to be an asset.

Looks like you have just taken some things out of what I just said.

As I said, assets can be classified into productive and non-productive assets. You can convert your productive assets such as dividend-paying stock, cash-flowing business, or income-producing real estate) into cash or gold (non-productive assets).

You might live on the cash "comfortably" as you said, but if you cease working or producing any money, then the more you live, the less money you will have left. I hope you don't outlive the money in your cash balance after the conversion.

Hope you understand it. The more you spend, the more the cash diminishes and depreciates in value due to depreciation.

That is why the best asset class to invest in is PRODUCTIVE ASSETS OR INCOME-PRODUCING ASSETS. If you have cash at the bank that generates ZERO interest but rather the bank feeds on the money and deducts operating expenses, what use has the money to you? You are spending way too much to keep that money. That money is not USEFUL to you... but to the bank and making the bank rich.

The best thing to do even if you want to keep that money in the bank is to ensure it generates some form of interest to compensate against annual inflation.

You might have gold, silver, or even bitcoin in your wallet, but don't forget all these are NON-PRODUCTIVE ASSETS. They are assets that only appreciate in value and yield capital gains when sold, but they do not produce any passive monthly income. These are all assets that keep their value, appreciate in value over time but DO NOT PRODUCE ANY RESIDUAL OR PASSIVE INCOME.

But as you already know, but I guess pretending, PASSIVE INCOME from ASSETS is the holy grail. Making 1 million annually by working hard for money is good, but making 1 million annually from multiple assets that produce passive, recurring income.. AND ALSO APPRECIATING IN VALUE over time is great.

If you buy a business that loses more money than it makes, that business cannot be called an asset. It becomes a liability. The financial statements (balance sheet, cash flow, and income statement) is what helps to make intelligent decisions when it comes to BUILDING MULTIPLE STREAMS of PASSIVE INCOME from ASSETS ( I mean productive assets, not non-productive assets).
 

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Let me start with the fact that I make around six-figures per month in passive income from my investments and intellectual property. So, I'm pretty sure I understand how cash flow and assets work.

That said, you're simply making up terms here (productive and non-productive assets).

Think of assets like H2O. It comes in different forms -- water, ice, steam. But, regardless of what form it's in, it's still H2O. Because H2O in any form can be converted into H2O of any other form.

Likewise with assets. A bar of gold, a rental property and a used mini-van are all assets -- just in different forms. And it's not hard to convert any of those forms of asset into a different form. I can turn gold into a mini-van pretty easily. I can turn a mini-van into gold pretty easily as well.

They are the same thing -- assets -- just currently in different forms.

You seem to want to make up a fancy name for cash-flowing assets. But, they already have a name -- cash-flowing assets. No need to make up another name. Especially not one like "productive," where you are assigning judgement to the asset.

Again, cash-flowing and non-cash-flowing assets are exactly the same...just existing in different forms.



You do realize that your so-called "productive assets" can diminish in value, and can even go to zero (or negative) cash flow, right? I know many people who had rental properties (what you refer to as "productive assets") back in 2008 who ended up bankrupt.

Clearly, having cash flow at one point didn't make those assets very productive when the shit hit the fan, did it?

I bet those people wish they would have had gold or silver instead of their cash-flowing assets, huh?



I do understand it. And what you're referring to is called "inflation," not "depreciation."

Depreciation is something completely different.




It sounds like you don't really understand how banks make the bulk of their money. But that's a separate discussion we can have in another thread, if you're truly interested in learning.




Again, you're making up terms that don't exist in the investment world. No serious investor would ever refer to "productive" or "non-productive" assets. Trust me on this.




Again, you have no idea what you're talking about.

Zillow lost over $300M in 2019 -- are you saying that the company wasn't an asset to shareholders?

If someone had offered to give you 100% ownership of Zillow back in 2019, would you have taken it?

By your definition, if a business has $100M in equipment and inventory, but loses one dollar per year, that business isn't an asset. Sorry, but that's completely ridiculous.
Thank you for your explanation.

I too considered that if "something" cost you more than it made, it was a liability. But from an accounting point of view, it makes no sense.

So, how do you differentiate between an asset that is making you money (let's say, a RE unit you are renting out) from an asset that is costing you money (a tree you have to water every day)? It's important to know since they ll influence your net worth. How do you call them then?

Also, let's say I am renting an appartment for very cheap. Several people would be ready to pay me to take over my contract, rent, and move into the appartment themselves.

Is the contract considered an asset then?
 
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ljean

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Also, let's say I am renting an appartment for very cheap. Several people would be ready to pay me to take over my contract, rent, and move into the appartment themselves.

Is the contract considered an asset then?
Yes. The value of your leasehold interest is equivalent to the present value of the market rent less the contract rent. This also means the value of the landlord's interest is diminished by this amount.
 

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Simpler version of RDPD ...... buy things that make you money, not doo dads. Use that money to acquire more things that make you money. Once that money is flowing and you no longer have to trade money for time, you can use some of that stream to get your doo dads.
 

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RDPD is not an accounting textbook.

He uses the words “asset” and “liability” metaphorically, or figuratively.

The point is to buy things that help move you forward, not things that hold you back.

The key is to use both sides of your brain to analyze the numbers and think creatively about your options.

But yes, in level 1 accounting terms, he is wrong about the definitions... but he isn’t reading a dictionary, he is using deeper symbolism to portray an abstract idea of entrepreneurship and investing.

For instance, a dishwasher is an asset in accounting terms, but if your business is cutting down trees, how many dishwashers should you “invest” in? Probably none.

So we can look at the book as novices and think his definitions are literally right.

We can look at it from an intermediate level and acknowledge that his definitions are wrong.

Or we can look at it from an advanced level, and see the point he’s trying to convey.
 
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Kevin88660

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It sounds like a lot of you have read Rich Dad, Poor Dad, that deals with the concept of Assets and Liabilities. Basically, an Asset is something that makes you money and a Liability is something that costs you money! It's that simple.

Inspired mostly by the book, I got rid of a lot of my useless possessions. I realized that most of the things I had, that I hadn't used for years, were not Assets and needed to be disposed of. I haven't regretted getting rid of any of it in the year since.

Using the paradigm of Assets and Liabilities has made me wonder what my assets really are. I know that my home isn't an Asset (I don't even own my own home). My possessions are not Assets. Question, is, what assets do I really have to show for the years I've spent working?
- Monthly savings from my paycheck
- Time
- My health
- Skills and knowledge

This had led me to think that of all your Assets, your knowledge and time are actually the greatest ones! If you took all of some tycoon's money, possessions, even their status as the owner of a company, what they'd have left is what they know and the skills they gained. They'd be rich again after a few years.

It's been rather humbling to realize how few Assets I've really gained from my years as an employee.

Anyway, I posted this because I'm interested in what other people have to say about Assets and Liabilities. What Assets do you think you have? How do you recognize an Asset? What Liabilities should you avoid?
Like what the Chosen1 Has summaried, Kiyosaki is using it as a metaphor. Assets are things that move you forward, liability is things that hold you back. He has a liking for cashflow generating business and emphasize on that.

If you talk about from accounting perspective assets is anything that you control has some sort of value. A house, car or a piece of paper are all assets. They are tangible assets. If you own stocks and bonds they are financial assets. If you owe other people money these are liability. So there is a term called net asset, which is how much you actually own (rather than control). So you have to take the value of your assets minus away the value of your debt to find out your net asset.

I think the really useful definition from the economics perspective is investment vs consumption. If you spent 10 dollar on a movie ticket is a consumption for fun that does not add useful value in your financial future. If you spent 10 dollar on a business book like unscripted it is an investment towards your financial future.

If you buy a good car to show off that you are well off then it is a consumption. If you buy a car because you need to travel to meet your clients daily then it is an investment.

I think for business people who always made a come back after bankruptcy, it is not due to the assets or knowledge they have. It is really the drive and risk-taking attitude. They are always learning and competitive. When they see an opportunity and they go all in (their time, money and attention).
 

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Think Expand

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Let me start with the fact that I make around six-figures per month in passive income from my investments and intellectual property. So, I'm pretty sure I understand how cash flow and assets work.

That said, you're simply making up terms here (productive and non-productive assets).

Think of assets like H2O. It comes in different forms -- water, ice, steam. But, regardless of what form it's in, it's still H2O. Because H2O in any form can be converted into H2O of any other form.

Likewise with assets. A bar of gold, a rental property and a used mini-van are all assets -- just in different forms. And it's not hard to convert any of those forms of asset into a different form. I can turn gold into a mini-van pretty easily. I can turn a mini-van into gold pretty easily as well.

They are the same thing -- assets -- just currently in different forms.

You seem to want to make up a fancy name for cash-flowing assets. But, they already have a name -- cash-flowing assets. No need to make up another name. Especially not one like "productive," where you are assigning judgement to the asset.

Again, cash-flowing and non-cash-flowing assets are exactly the same...just existing in different forms.



You do realize that your so-called "productive assets" can diminish in value, and can even go to zero (or negative) cash flow, right? I know many people who had rental properties (what you refer to as "productive assets") back in 2008 who ended up bankrupt.

Clearly, having cash flow at one point didn't make those assets very productive when the shit hit the fan, did it?

I bet those people wish they would have had gold or silver instead of their cash-flowing assets, huh?



I do understand it. And what you're referring to is called "inflation," not "depreciation."

Depreciation is something completely different.




It sounds like you don't really understand how banks make the bulk of their money. But that's a separate discussion we can have in another thread, if you're truly interested in learning.




Again, you're making up terms that don't exist in the investment world. No serious investor would ever refer to "productive" or "non-productive" assets. Trust me on this.




Again, you have no idea what you're talking about.

Zillow lost over $300M in 2019 -- are you saying that the company wasn't an asset to shareholders?

If someone had offered to give you 100% ownership of Zillow back in 2019, would you have taken it?

By your definition, if a business has $100M in equipment and inventory, but loses one dollar per year, that business isn't an asset. Sorry, but that's completely ridiculous.

Again, you seem to be taking things out of context.

You claim I am using "fancy" words to classify and describe assets. Well, these are not my terms... they're from the world's richest investor, Warren Buffet.

I guess watching this video might help you to understand and gain clarity in my classification.

View: https://www.youtube.com/watch?v=HjES4ba10AM


I remember doing a deeper study on assets in 2018 and 2019. I took all videos from Warren Buffet on assets and watched them. I developed my understanding from them. That is the reason I classify the assets this way:

1. PRODUCTIVE ASSETS: Assets that produce cash flow and appreciate in value over time. These assets produce passive monthly and annual cash flow/income, retain their value, and also appreciate in value over time. A good example is a dividend-paying stock, a cash-flowing business, cash-flowing rental property, a farm etc.

2. NON-PRODUCTIVE ASSETS: Assets that appreciate in value, but do not produce any form of cash flow while holding or keeping them. The appreciated value can increase a person's net worth and also be converted into paper money when sold. But these assets do produce any passive monthly cash flow. A good example is gold, bitcoin, cash in the bank, etc.

I do not disagree with everything you said. An asset can help you achieve your financial goals. It can help increase your net worth, make you financially free, and so forth.

A real estate property can appreciate in value but produce ZERO passive cash flow over a period of time. That does not mean that it is not an asset. It is still an asset. I am not saying your real estate properties are not assets just because it does not produce positive cash flow. The same thing applies to a business.

Again, a real estate property or a business can produce passive income and appreciation in value over time. But due to poor management and other key factors produce less to ZERO in passive income and also depreciate in value over time. It takes a lot of know-how, skills, and dedication to keep productive assets productive.... producing passive income and increasing their market value.

Currently, I'm not investing in real estate. But I will tell you that I have recently become financially free when passive cash flow from assets I have been working on over the years have far exceeded my monthly expenses. It took me two years to achieve this when after I decided to focus on productive assets, creating more PASSIVE INCOME GENERATORS ( I call them PIG's), and focus on increasing PASSIVE INCOME from my ASSETS.

I personally do not focus on net worth, I focus on increasing my passive monthly cash flow and using income from my assets to invest in other productive assets that produce more passive cash flow. On the bank issue, my family does own and run a bank and so I really understand how banks operate.

You can try to say all assets are assets. But they do not operate and function in the same way. Water, ice, steam is still H20, and can all be converted into other forms, but each has its own function and purpose.

Again, I learned the differences between asset classes and decided to focus on working to create or produce more productive assets that produce passive monthly cash flow while appreciating in value over time. You can use assets to increase your net worth, but I focus on using assets to increase my passive cash flow and stay financially free.

While my assets produce passive income, they still increase in value. I can sell them if I want to, but I love the cash flow they produce, not the lump sum of money someone will give me when he buys. Thanks.
 
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Sethamus

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. I know that my home isn't an Asset (I don't even own my own home). My possessions are not Assets. Que
The issue with this statement is what Jscott is referring to. A house is an asset, both my primary home and rental are both assets.
Btw, as for your house, imagine it was completely paid off. Would you consider it an asset at that point?

I think the really useful definition from the economics perspective is investment vs consumption.
This is the answer that you need to wrap your head around @KenDunlop
The confusion on your house in RDPD is that your primary house is not an investment even though it may appreciate (Besides the house hacking ex which you purposely buy and fix to move out and resell).

Unless I’m at the bottom with no other possibility I would never sell the house my family is living in unless I had to downsize to feed my family. Have a place to call home and food on the table are the top 2 priorities in life. Even if you are renting it is the same concept. Would you move out for a small financial gain and live on the streets? No you wouldn’t, which is why people sell and almost always “move up” in house.
 

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Reading the entire thread, pretty much everyone is right. But it’s all opinion and perspective and goals.

It all depends on why you are buying something, what you are using it for, how you use it, if you can afford it, what’s your plan, etc.

For example, I have a primary home that I bought for 70% of the appraised value and am currently repairing and renovating. After a brief period of living in it, I plan to sell for tax free capital gains.

I can potentially double my net worth in 1-2 years from this one purchase.

That’s certainly an investment! But if I had no intention of selling and if I paid top price, and ended up underwater on my mortgage, that’s not much of an investment.

@JScott is completely right about assets and liabilities.

But the usefulness of an asset depends on what it is and how you use it.

Not all assets are equal, and it depends more on what YOU do than it does on what the asset is.
 

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Uh, yes you did.

Here's a direct quote from your earlier post:

"If you buy a business that loses more money than it makes, that business cannot be called an asset."

That's the problem with creating convoluted terms for things -- you start to confuse even yourself.
I was going to respond to that statement also but I see that you already have. How many businesses on Wall Street lose money every year and yet are worth many millions of dollars. That statement was just so wrong.

The bottom line though, is that you can have your own internal definition of assets and liabilities yourself. In the end it doesn’t matter what they are to you inside your head. However when you go to the real world and try to explain it to somebody then you have to use generally understood language.
 

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Uh, yes you did.

Here's a direct quote from your earlier post:

"If you buy a business that loses more money than it makes, that business cannot be called an asset."

That's the problem with creating convoluted terms for things -- you start to confuse even yourself.
I do not create terms. I use terms already in existence...as you can see. Also, I'm not a talker, I'm a doer. I practice and that gives me better understanding.

I admit that section of my post and that is why I took my time to clarify things for you in my later post.

Whichever way, if an asset keeps losing money, regardless of how much the market value is, it will eventually go bankrupt. No wonder many businesses go bankrupt, get sold for peanuts or even just completely disappear. Cash flow is always king.

And investing in assets for cash flow first and then gaining appreciation and capital gains on the asset is the best, in my own personal opinion.
 
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Think Expand

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Your language indicates that you don't really understand these concepts.

Assets can't "go bankrupt"... Entities that own assets (and their paired liabilities) can go bankrupt, but that's simply due to the liabilities, not the asset.

The value of an asset can only go to zero. But, if the asset has paired liabilities, then the entity that owns the asset and the paired liability(s) can go bankrupt if the value of the liabilities exceeds the value of the asset.

If there are no liabilities associated with the asset, the asset can't be worth a negative amount. By definition.

A gold bar will never be worth less than zero. A dividend paying stock will never be worth less than zero. A rental property can never be worth less than zero unless the coupled liabilities (mortgage, taxes, etc) outweigh the asset value. A business only loses money if it has liabilities that outweigh its assets.

As you can see, I'm using asset there in the CONTEXT of a business or company. It is an entity which does exists on its own...and can go bankrupt.

Poorly managed businesses or companies can go bankrupt when they are not earning enough money to cover operating expenses, start up costs, finance costs, and any underlying liability as you rightly said... regardless of their whopping market value at the time. Thanks.
 

WJK

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It sounds like a lot of you have read Rich Dad, Poor Dad, that deals with the concept of Assets and Liabilities. Basically, an Asset is something that makes you money and a Liability is something that costs you money! It's that simple.

Inspired mostly by the book, I got rid of a lot of my useless possessions. I realized that most of the things I had, that I hadn't used for years, were not Assets and needed to be disposed of. I haven't regretted getting rid of any of it in the year since.

Using the paradigm of Assets and Liabilities has made me wonder what my assets really are. I know that my home isn't an Asset (I don't even own my own home). My possessions are not Assets. Question, is, what assets do I really have to show for the years I've spent working?
- Monthly savings from my paycheck
- Time
- My health
- Skills and knowledge

This had led me to think that of all your Assets, your knowledge and time are actually the greatest ones! If you took all of some tycoon's money, possessions, even their status as the owner of a company, what they'd have left is what they know and the skills they gained. They'd be rich again after a few years.

It's been rather humbling to realize how few Assets I've really gained from my years as an employee.

Anyway, I posted this because I'm interested in what other people have to say about Assets and Liabilities. What Assets do you think you have? How do you recognize an Asset? What Liabilities should you avoid?
I have put different things in those two categories, depending on where I am and what I am doing. There are times where items have swapped between the two lists.

Things that were vital to my life in the past just don't matter anymore. Once upon a time, I considered them to be an asset. Now when I come across those possessions, I tend to give them away to someone who needs them. They are something else to be cared for or stored. I'd rather have the empty space.

Later in this thread, you talked about that these terms are concepts rather than actual demarcations. I totally agree with that. Accountants have an exact definition and ways of dealing with each group. I don't have to adhere to that narrow set of rules. Defining and categorizing my business is a personal judgment call based on my current situation.

Your idea about experience and education is very interesting. I tell kids that the only they will ever really own is their education. They can't get too old for it. They can't gamble it away. They can't lose it through bankruptcy or divorce. They will have their education for the rest of their lives. Experience falls into that same paradigm -- point of view.

If you divide up everything among a group of people to make things equal, you'll need to do it again at least every Friday night to keep it all equal. Money is fungible. It is attracted to the guy who understands how to make and how to take care of it. Most people must make their fortunes an average of three times before they are able to hang on to it. Each time, it usually gets easier and faster. And the experiences learned become the steps to success.
 

thechosen1

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I know a guy who built a 40 million per year revenue business with around 20 million in equity through assets alone (paying down loans on property, equipment, etc and always expanding more). If you valued his business in total, he's worth much more than that asset value.

He has no college degree and talks very "country."

He doesn't know much about accounting at all. He knows a lot about his business and could do literally every task every worker does (not at the same time, obviously).

His favorite quote is "accounting is an inexact science." Hahaha

A lot of times there are people way richer than you who know much less than you about all those academic terms and details.
 
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Harbourmaster

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Absolutely... Lots of exceptions to the rule...

As Richard Branson says, "The best path certainly isn't the only path..."
I always marvel at someone trying to pick an academic fight with someone who is clearly more well versed in the area of academia they are choosing to argue in. It's like arguing with Gordon Ramsay about the proper internal cooking temperature of chicken. To me, when someone with the experience and knowledge teaches a concept it probably is wise to heed that advice with an open mind instead of being righteous. Thanks for the informative posts @JScott was great for a Monday morning read.
 

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