Is your car an asset?

Well, according to Robert Kiyosaki your car is a liability. An asset puts money into your pocket while a liability is anything which takes money out of your pocket. You spend on your car when you buy fuel, pay insurance, parking fees, traffic fines, maintenance and any car loans. Therefore your car is a liability. According to this definition your home is a liability as well. You might be repaying a mortgage or salary loan. You fix broken tiles and pipes. You cut the grass as well. You repaint. All these things are not putting money into your pocket.

To many young people owning a car is a demonstration to their clan mates that they have arrived. As such many are willing to take their first loan to acquire a second hand car. However this is the worst thing you can do at the beginning of your career from a financial stand point.

In his classic book called Rich Dad Poor Dad, Robert Kiyosaki argues that middle class people work at jobs and buy liabilities they think are assets. Rich people own businesses and investments which they use to acquire more assets. The poor only have expenses. Most people struggle with money because they don’t understand the difference between an asset and a liability.

If we want to quit the so called rat race then we need to start buying assets which put money into our pockets. This calls for a mindset shift. We need to start minding our business and not be so afraid of taking risks. Robert Kiyosaki advises us to become financially literate. This way we replace ignorance and fear with understanding and courage to take charge of our financial lives.

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