Tuesday, April 17, 2012

Assets Are Not What You Think They Are

The boring old dictionary definition of an asset reads something like this--an asset is anything that is valuable or useful.

Does that mean toilet paper is an asset? An argument could be made that those little squares of white paper are both valuable and useful. The same could be said about a computer or a stove or a pick up truck. But are these really assets?

According to Rich Dad, Poor Dad author Robert Kiyosaki in his book, Unfair Advantage (c.2011), an asset is something that brings you positive cash flow...that's it. Your house you live in, by that definition, isn't even an asset. It's an expense.

Now, I confess that I'm not actually reading Unfair Advantage right now but someone very close to me is, someone who has not stopped talking to me about the content since he "borrowed" it from my desk a week ago. I was planning to read and review it, which is why it was on my desk available to be borrowed.

From what I can see, this book could be a game changer for readers who are looking for ways to maximize their personal and financial potential, even if they did not know they were intentionally seeking to maximize either of those things. According to my reader-friend, Kiyosaki's Monopoly-game approach to wealth-building and his straight forward prose loaded with personal stories is powerful.

I've been told that Kiyosaki is brutally honest and in your face about the stupidity of following conventional financial wisdom that says we all have to live within our means, save money and invest in a diversified portfolio of stocks, bonds and mutual funds. He says that all of those those ideas are lies that leave you poor and broke. Those are powerful thoughts indeed.

So if toilet paper and the houses we live in aren't assets, what are? Like a fresh-faced convert my reader-friend can answer this off the top of his head--businesses, real estate that earns income, commodities and income earning investments are assets, and anything else you buy is an expense, even those things in which your are hoping for capital gains.

In short, positive cash flow = asset. Is this life-changing financial knowledge? I'll let you know.

Copyright 2012. Laura Thomas. All Rights Reserved.
For reprint permission please contact moneyme at telus dot net.

1 comment:

  1. Looking at how your business is thriving means you have to watch whats is happening with all of your assets and also of your liabilities. There should always be a check and balance between them.

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