Liability Vs. Assets

[cristian tello]

How to differentiate between the two ?
in RDPD , kowaski says that "the rich buy assets, poor buy liabilities"
but what is the simple way to get to know which is which ?

 

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[Get Right]

Ask yourself if it makes money and/or increases in value.

Asset - yes
Liability - no

 

[socaldude]

RDPD says that an asset puts money into your pocket and a liability takes money out of your pocket. I don't think RDPD is talking about Assets and Liabilities in terms of accounting fundamentals. I'm personally not a big fan of that. I think RDPD is saying how broke people never build an asset like a business and always buy material liabilities like Cars and Clothes. In turn the rich buy businesses and build them while they minimize their consumptions. It's a lot more complicated than that. It's always best to think of things in terms of classic finance and accounting fundamentals; Asset Value, Net Income, Free cash flow etc. Why? Because this is what makes the world go round. Apple computers doesn't label things as assets and liabilities the same way RDPD does. RDPD is just saying this so that you can see how differently the rich spend their time and money; they build and buy assets. While the poor spend their time and money on liabilities like 3 series BMWs and Video games.

The right way to look at it is that It just depends on the nature of the asset or liability and how it functions. Leverage AKA liabilities can be a really good thing for example, like in real estate, but it just depends on how its managed and structured. Learn basic finance and accounting and you will gain a better insight as to what is an asset and a liability is. For example a BMW is an asset in terms of classical accounting but not for RDPD.

Learn basic finance valuation and fundamentals and accounting. Don't listen to RDPD IMO, don't get me wrong I like RDPD but there are some things i disagree with and some things I agree with. When you cash out of your fastlane business, how do you know what is a fair price to sell your business at? RDPD is NOT gonna help. You need to learn finance and accounting the way the pros do.

 

[SanMateo]

Asset = Adds Value
Liability = Takes Away Value

 

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