Asset: Something that generates income either equal to or in excess of liabilities
Liability: Something that you’re responsible for , such as a mortgage debt, or financial obligation
Simply put, Assets bring money in, Liabilities take money out. Let’s look at how this works for the rich and the middle class.
Those who understand the differences between an asset and a liability, and have financial knowledge (which I can teach you right here), will know that you need more income than outflow to amass wealth. So what do the rich do? They invest more money into assets that gain them income, in excess to liabilities.
They then use the excess income to reinvest back into their assets, which then grows more, increasing their wealth even further. The chart below is a simplified visual to see what happens when your assets exceed liabilities, and using the excess income to reinvest back into the assets.
How the rich became rich
So what about the middle class? That prized wonderful, amazing, 2 car garage home buying, white picket fence, 9-5 job, 401k investing, middle class person average up when we look at assets and liabilities? As we see below, the middle class typically will break even, with their expenses and income being about the same, having little to no assets, and their liabilities taking most of their capital. Their might be a bump in their income, when they get a pay raise, but then their expenses raise with it. Causing no gain in wealth.
The middle class
My mindset and focus has totally changed since realizing this. I fell into that average middle class mindset. One thing that shocked me into getting my mindset right, was seeing how much people are getting on average for Social Security during retirement. I’ve seen on average a recipient getting between $700 – $1300 a month. That’s a month, not every two weeks. Social Security checks is their only source of income. No other savings, retirement, or anything to bring them income. Could you live off of $700 – $1300 a month? With the price of rent, or a mortgage these days, you wouldn’t be able to survive. That is why it is important to start now, building up assets that bring you income, and use the excess to reinvest in your assets to grow wealth.
The Cardone Playbook will teach how to do this, what it takes to gain financial freedom, to reach your financial potential. Do you know the 95/5 rule? Spending 95% of your time looking at your income statement, and 5% of the time on your expense statement.
I encourage you to get Cardone’s Playbook, eBook, simply for the incredible knowledge it has. We all need financial knowledge. They didn’t teach you about money in school or college. Get your mindset right, get your finances right, invest in yourself today to start working toward the success you deserve.