Rich dad taught Robert that while the rich were buying assets, the poor and the middle class spent their money on liabilities. Rich dad said assets are things you put your money into that keeps their value or increases in value. Liabilities are things where you put your money in and your money goes down in value and many times disappears all together.
An easy way to explain it is Owning vs renting your home. Now, Owning your home might cost a little more on a monthly basis, however, down the road you have an asset which goes up in value. Renting a home might be a little less per month, but, when you are done you’ re left with nothing. Zero to show for it. Rich dad does have an interesting take on owning your own home. I will get into that in another blog later.
If you take a look at the diagram above, you will see that a liability on the left hand side, simply takes money from your pocket or goes down in value over time. On the right hand side is an example of an asset, which is designed to put money into your pocket and increase in value over time.
So, whats great about our simple programs is they are assets. As our clients set money aside every month, their asset grows and grows and grows, and at the end our clients can use the cash for whatever they want, retirement , college for the kids or just keep growing it and they can access it when ever they want. It even grows tax deferred, meaning you don’t have to pay taxes on it like you do at the bank, but I’ll get to that in another blog.
The Programs that a lot of people out there have, they pay and pay and pay and at the end of their term, its over, they are left with nothing! Zero! Which makes it a liability.
So let me ask you, all things being equal, How would you rather take care of your Mortgage Protection, Like Rich Dad, Or poor Dad? All things being equal, meaning dollar for dollar, I don't know a single person who doesn't choose Rich Dad. What about you?
