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Do You Really Have Financial Assets?

Mar 5, 2008
Developing financial intelligence is elemental in developing the skills that will teach you to make money and create wealth. This stands to reason and is easily accepted by most people interested in creating financial wealth. Part of developing that financial intelligence lies in redefining certain financial terms; among the more important concepts to understand is what truly constitutes your assets and liabilities.

Redefining Financial Assets And Liabilities

To redefine assets and liabilities, we have to take a step back and understand what income and expenses are.

On a basic level, income and expenses can be described thusly:

- Income: spending cash, pocket money, the amount of cash you have

- Expenses: things you spend money on, things that take money out of your pocket, things that reduce your income

It is important to have a basic understanding of what income and expenses are in order to understand what assets and liabilities really are.

If you are to accept the definition of an asset as given by a bank, your assets would be

- Something you "own" (even though you might not really own it entirely) such as a car, house, furniture, boat, recreational vehicle.

Now consider an alternative definition for what an asset is; this definition is provided by Jamie McIntyre, creator of the wealth creation education program from the 21st Century Academy.

- An asset is something that makes you money while you sleep

Or, as Robert Kiyosaki (Rich Dad, Poor Dad author) puts it,

- An asset is something that puts money [income] into your pocket without your having to work for it

What, then, is a liability?

By all accounts,

- A liability is something that takes money out of your pocket

So, a liability is an expense.

Go back and look at what a bank's definition of an asset is. Now use these criteria, these definitions to classify something like a house or a car.

- Do you own assets or liabilities?

Even if you have paid off your car or your home, it will continue to cost you money. Then what column does it fit into? Liability.

Why It's Important To Understand Liabilities And Assets

Why does any of this matter? Does this change the banking systems of the world, just because you now understand that your property is probably not really an asset? Should you not buy a home or a car? Probably not.

The reason that it is important to change your thinking in regards to financial terms like assets and liabilities is that it is important to reevaluate your true worth and your true financial standing. (It is also important to evaluate who is making money from your assets, you or the bank.)

Once you have an idea of where you stand, you have a starting point for wealth creation. You have enlightened yourself and reached a point of understanding; you can move beyond what you are sold on the banking streets to achieve true financial independence, to put your money into assets that will truly work for you instead of against you.

None of this is to say that you should not buy the things that you want or need, or to even to say that you should not take advantage of credit. What this is saying is that you should understand what those things are really doing for you, and take them only at their true worth. Then, you can apply your efforts at wealth creation to financial strategies that are truly income-producing, really assets!

This is just one snippet; one example:of the kind of education you can receive through a quality wealth creation program. This is an example of the real world knowledge that the wealthy already have, and is given in the spirit of enlightening you as to why you may be finding it hard to succeed financially working within the parameters set by banking institutions.

Use this example as a starting point, a source of consideration; use this to evaluate what might be lacking in your financial education. And when you are ready to really succeed at wealth creation, see what else a wealth creation education can do for you.
About the Author
Sean Rasmussen is a stock market and property investor. He likes topics about communication and success. His wealth creation blog deals with topics of financial freedom and creating wealth.
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