Is a house an asset or a liability?
Here are the main differences.
Oh, what are assets? Oh, what are liabilities? This is a discussion I hear often, not even in financial circles, but in normal circles, people think a lot of things. Your assets when they're really not. If people think a lot of things are liabilities when they're actually not. So on this video, we're going to go over ways to differentiate them and actually real life examples that are going to help you differentiate between the two.
All right. The one that's not so fun, but I see far more often as a liability, a liability. Is this anything that takes money out of your pocket on a daily, weekly, monthly basis? My stomach is a liability. No. Some people believe their homes or liabilities are our assets. In essence, they're actually liabilities.
Because think about it. You pay your mortgage, your property taxes, your homeowner's insurance, whatever more. Repair maintenance. That is a liability. That is not an asset. A liability takes some takes money out of your pocket every month to support the liability. Yes, you can sell the home and perhaps make a profit, but that does not make it an asset.
That's the big differentiator. Liabilities take money out of your pocket. A homeless, not an asset. A vehicle is not an asset. Now, I'm gonna use this. If you're home, you are renting out for some nature in some nature, then that has become a asset. It is not a liability anymore because now you are earning money is coming to you because you own this a vehicle the same way it is a liability, insurance, fuel maintenance, uh, the car pant, whatever you have that is a Y ability unless you are driving.
And making money for it or renting it or whatever it is. Unless you're using in some nature to put money in your pocket. Liability. So do not think that a home is an asset that is the biggest differentiator. It is like liability. It takes money out of your pocket and does not give you anything in return besides the ability to drive or the ability to live somewhere, which is a good thing.
However, this discussion of your home is your big, your home is your biggest asset. Stop. No more. Stop. No, I have assets, assets or something that puts money in your pocket. So cashflowing real estate. Your job more or less, which we'll get to another topic. I think trading money for time is a complete suicide longterm, but it's putting money in your pocket.
Anything that puts money in your pocket, not something that takes money out of your pocket, a business, you want those horrible, hopefully it's putting money in your pocket. If it's not successful, it's putting money in your pocket. The big differentiator is. And asset puts money in your pocket on a regular basis.
A liability takes it away, and that's the issue with most people who have a poor mindset but want to look rich. Just because you own a imported vehicle or a fancy looking house or a very nice designer suit does not mean you're rich. I remember being young and thinking. Those around me were so rich because they drove a nice car.
Their parents had big homes, and then the crash of Oh eight hit, and as a teenager I saw many people foreclosed on their homes. I saw all these for sale signs and I did their only understand that until I spoke to people a lot older than me and said, well, this is what happens simply because. You have stuff simply because you make an income does not actually make you wealthy and that's the big difference.
Your wealth is not based upon the amount of money you make. It's the amount of money you keep and use to grow. Imagine your money like this. Your money is, the army is your army of money, ALM, army of money, and you want your soldiers to go to battle. It's a war. All the time. You want them to go to battle and come back with prisoners with prisoners of war, other money.
When you put your money somewhere and it either sits or is spent and you never see it again, your soldiers died in battle and you have to really, really make this very, very visual. I literally think of sending my best friends up, sending George out. To war, first precedent to war. And I want George to bring about all his friends, well his enemies, if they're going to war, but all of his friends back, cause we're going to have a good old time and my accounts growing for some more.
So think about this. We're at work and you want your, your fellow money soldiers to bring back pissed prisoners of war. You don't want them to die at work. If you did die at war, you're not going to be safe for anything. Assets, liabilities. You want to grow your assets, and that's what I see so many people growing their liabilities, believing their assets, believing that it's enriching their life in some way.
But in reality, a $500 a month car payment is only enriching one person, and that is the person that gave you the loan because you probably could have bought a less expensive car for a less extensive payment or cash. Sometimes buying cash is better. Sometimes not. So you're enriching their life with the interest.
However, a year I now stuck with this car payment for 60 months at $500 a month. I see this all the time. For people who literally have vehicles that are worth as much as they make an eight year, what? Why would you buy a $50,000 car if you make $50,000 a year, that is called being underwater upside down something you do not want.
If you want financial independence and financial freedom, and it's not like gold everybody, but I think most of you are watching this video. We're going to think I do want financial freedom. I do want financial independence. You want to keep on growing the assets, the liabilities, the fancy cars, the fancy stuff, the stuff that makes you look rich does not actually mean you are rich.
Rich is a mindset. Rich is something that if someone inherited $5 million with a poor mindset. They'll be broke within a few years because they don't know how to deal with it. However, a rich person may not have a ton of money. However, their mindset allows them to manage the money they have effectively, and they're able to, as the money comes to keep it and to send their soldiers off to war to bring back more.
As opposed to sending their soldiers off to war to the car dealership and dying every single month over and over again. So you want to continue growing your assets, whether that'd be real estate, uh, some type of, uh, securities, investments, stocks, bonds, things of that nature. But that money that keeps on coming in is going to be what you can build your wife's style upon, not the money that goes out.
Build your assets, limit your liabilities as much as possible and you are on your way.