What the Wealthy Know - Assets V's Liabilities

Most people get it confused when it comes to distinguishing between assets and liabilities. They believe their belongings are assets; however, many if not all of these items are actually liabilities.

Assets can be classified as items that generate income, store value or even do both.

Some store of value assets can include items such as antiques, art work, collectibles, certain cryptocurrencies, gold, silver and other precious metals to name a few. These items do not typically generate cash flow, but the right items do increase in value over the years.

Cash producing assets can include items such as dividend yielding stocks, rental properties (both residential and commercial), or any number of other items that bring in a stream of income.

A liability on the other hand is anything that cost money to own including vehicles, boats, RV's, TV's and many other things that have an entertainment value but do not generate income. These items take money out of our pockets in the way of upkeep and repairs. Most of these items will depreciate in value over time.

Wealthy individuals tend to invest the majority of their money into assets and allow the income produced from these items to pay for liabilities. Most middle and low income people do the opposite spending their money on liabilities and investing little or nothing on assets that will appreciate and/or produce an income stream.