In this blog post, we're going to be talking about the difference between an asset and a liability. More importantly, what is an asset versus what is a liability and how this can truly make us more intentional, have more money, have more wealth just by these principles.
My name's Caleb Williams. This is the Better Wealth blog. The purpose of this blog is to make content about money, finance, and business to help you live more intentionally. And I can't think of a more intentional way to think about investing to actually understand the difference between what is an asset and what is a liability. It's really the paradigm between how we think of investment.
If you type into Google "what is an asset," you'll get responses like Investopedia saying an asset is anything of value. Robert Kiyosaki is noted for saying an asset is something that puts money back in your pocket, meaning it generates cash flow. He also famously said that the house you live in is not an asset because in many cases, it's a money drainer rather than a money creator.
My definition of an asset is something that will help you live more intentional. Just by having it, you're able to live more intentionally, because my definition of wealth is intentional living. If that is the goal, assets help you with that, and liabilities take that away.
If you look up liability, it is often related to debt or something you're liable for. Robert Kiyosaki says a liability is anything that takes money away from you. My definition of a liability is something that prohibits you from living intentionally.
We're not saying a liability is purely debt, because if you read this blog, you'll realize that debt can be used in amazing ways to help you live more intentionally, have more wealth, and be more in control. However, debt could also be a liability if it's bad debt, taking you away from achieving those goals.
The quick check mark is this: Is the activity I'm doing with my time and money helping me get closer to where I want to go? Is it helping me live more intentionally, whatever that means for you? Is it generating wealth, cash flow, is it giving you more control, or eliminating risk? If the answer is yes to all that, then it's an asset.
Sometimes you think you're investing in an asset, but if it's taking you away from living intentionally and eliminating wealth, it's a liability. We call this the "investment DNA checklist" where we ask questions to go deeper into the result we're getting by putting time and money into something.
Robert Kiyosaki mentions financial freedom is having enough cash flow to cover expenses. I say financial freedom is having enough cash flow to live intentionally. For someone, it could be $5,000 a month, for others, a million dollars. It varies, but you should determine what intentional living means for you and use your time and money to achieve it.