Walking away from the lecture on financial accounting last week, I recall Robert Kiyosaki’s education novel, “Rich Dad, Poor Dad” instantaneously. According to the author, the primary principle that separates the rich from the poor is that the rich “knows the difference between an asset and a liability”.

The definitions of the two terms that I noted in class are:

• An asset is a resource that one owns and has future values.
• A liability is anything that one owes.

Sharing similar ideas, Kiyosaki defines these financial terms in an interesting way:

                  “An Asset is something that puts money in my pocket. A liability is something                          that takes money out of my pocket” (58).

Having a rental property is an asset because the tenant must pay you, the landlord the amount of rent agreed on a timely basis.

Despite its glamour, owning a mansion is a liability in the long run.  Not only do you have to carry heavy mortgage payments, but you also have to pay higher property taxes, electrical bills, heat and other additional fees to support your mansion.

Want to learn more about finance and how to retire rich at a young age?

READ the “Rich Dad, Poor Dad” series by Robert Kiyosaki!

Reference:  Robert Kiyosaki ‘s “Rich Dad, Poor Dad”