Episode 52 – Assets and Liabilities
Money makes money, and it does. But the key is how does money make money? How does wealth build wealth?
See, you have to know how to build wealth in order to allow your money to make more money for you. As I explained in the last episode, for most of you getting more money is just going to mean more debt. And I’m telling you, it’s fact. It’s science. Look it up – it’s true that as people make more In today’s episode, I’m going to talk to you about why the rich keep getting richer and the poor keep getting poorer. You have to make a decision. Are you going to join the wealthiest of the wealthiest people in the world who continue to get more and more wealth, or are you going to be part of the group of people who are in the rat race? Today, I’m going to talk to you about how to avoid that rat race and get over on the way to building more wealth and letting money make money for you.
This is Titanium Life Radio with your host, peak performance speaker and business coach, Arman Sadeghi.
In the last 10 years, the wealthiest Americans have become more wealthy, while the poorest Americans have become even more poor. How is that possible? How is it that the top gets getting better and the bottom keeps getting worse? How is it that across the universe this seems to be something that happens all the time, which is that the people who don’t have money, who are struggling no matter what we do, struggle more and more, while the people who make a lot of money continue to have success? And some people will say it’s because money, they are more likely to be in more debt. That means the people with the most debt are typically those who are making more money.
So making money is not the secret to building wealth. What is you the secret? I already told you Step 1: cut your expenses, Step 2: invest your money, and Step 3: go work harder than anyone else you know and making sure that you’re going out there, making as much money as you can, and being absolutely obsessed with your long-term goals.
So today, I want to talk to you about the difference between assets and liabilities – and again, not in a boring way. So what is an asset? What is a liability? It’s very, very simple. An asset, in my definition, is something that when you acquire, it somehow makes you money. A liability is something that when acquired, costs you money, right? So it’s not just the cost of initially purchasing it, but it will actually cost you more money. So let’s do a quiz and see.
Now, by the way, when I describe assets and liabilities, it’s not the same way your CPA would talk about it. So let’s take the first thing that your CPA and I are going to disagree on: your car. Is it an asset or a liability? Your CPA would say it’s an asset, right? But I’m going to tell you it’s a liability. Why is your car a liability? Because if you don’t have a car today and I gift you a car – I give you a $50,000, $100,000 car, right? I buy you a brand-new Tesla today and I hand it to you. What’s going to happen over the next couple of years? Is it going to make you money or is it going to cost you money? It is going to cost you money. Why? Well, because when you have a car, now you’ve got to wash the car. You’ve got to get the oil changed. You got to change the brakes. You got to get the new tires. All these things come along with it and in fact, if you have a normal car right now and I give you a really fancy car, it costs you money even in other ways. Because in society, what happens as soon as you start driving a nicer car? Now your friends expect you to buy dinner, right? Now you have to buy drinks for people. Now you have to have a certain way of doing things.
Me in the past, I’ve gone and bought new cars, and the next thing you know I’m like wearing a new wardrobe, I have new glasses to match my car. It’s like, “Well, why did I need new sunglasses? Oh, well because I’ve got this fancy car. Now I’ve got to have the fancy clothes and, you know, dress myself up to go along with it,” so a car is absolutely a liability. What about furniture? Liability. What about clothes? Liabilities.
What about a house? See, a house is an asset. And when different people talk about this by the way, if any of you have read Robert Kiyosaki’s amazing book, it’s an awesome book called Rich Dad, Poor Dad. If you haven’t, you’ve got to go listen to it or read it – amazing, amazing book. And he talks about assets slightly differently. He even goes as far as saying the house that you live in is not an asset; it’s a liability.
I’m going to stop short of that for the sake of this. I get what he’s saying and I do agree with him. But for the sake of this, I’m going to call your house an asset. Why? Because if you buy a house today, whatever price you buy it at – if you think the real estate market’s high or low, it doesn’t matter. Trust me, 25 years from now in 99.9999 percent of the world, that house is going to be worth more. So that house is going to make you money and in some places like Southern California where I live, real estate has almost doubled in the last seven or eight years, and some people don’t seem to think about that much, right? Real estate has moved a lot: commercial, residential – all of that.
Now, there are parts of the country where real estate has gone down. But even where it goes down, how much does it go down? Maybe a few percent? But over 10 years, 15 years, 20, 25, 30 years, what happens? See, building wealth is not a game that you play over a few weeks or a few months; it’s a game played over many years or decades. That’s how wealth is built. And, you know, I could put on events and I can have five times as many people show up. If I got on TV or I got on social media and talked about these tricks and secrets to how to build massive wealth and teach people, you know, how to build wealth overnight – see, people love going to events like that.
But I’m not going to tell you that, because that’s not reality. What I want to talk to you about is the reality of how to build wealth over a lifetime and enjoy the process. And in fact, enjoy your life more today, and what’s that secret? Cut expenses, invest your money, and then go work your butt off. But when you’re investing your money, where do you want to invest it? You want to put it into assets and not liabilities. So an asset again is something that makes you money. The stock market – if you put money in stocks, that’s an asset, even if you lose it all – which you won’t if you do it the right way. Even if you lose money in the stock market, it’s still an asset. It’s not costing you any more money, right? And real estate – again, it’s an asset. It’s things like that that you want to have: things that gain value or things that make you money.
For example, you can buy some sort of a tool, right? That could make money. There are all kinds of examples of it. Investing your money in a business, a business is going to be an asset if it makes you money. Now, be careful, because a lot of you, you run businesses and they’re liabilities for you. But anything else you’re buying: shoes, clothes, you know, gym memberships – all this sort of stuff – those are all liabilities. Now, I’m not telling you not to do those things. I drive a nice car, I have very nice gym memberships, I like to buy really nice clothes, I buy awesome gifts for my wife, we love to take vacations.
We do all of those things but you’ve got to balance how much of your money goes into assets and how much of it goes into liabilities. And what’s the difference? An asset makes you money and a liability costs you money. And if you’re thinking of something and you’re not sure if it’s an asset or a liability, trust me, it’s a liability. Because you’re going to say, “Well Arman, how are my shoes a liability?” Well, your shoes are a liability because they’re going to cost you money, I guarantee you. And why? It’s because of human nature. See, if I buy you new shoes, now you need a new outfit to go with your shoes. Or now you need to shine your shoes, or now you need shoe laces, or whatever it is. And if you buy really nice shoes or I buy you a really nice purse or a really nice ring, now again, now you’re going to buy your friends gifts.
If you’re a business owner and you suddenly roll up in your brand new car that’s super, super nice, now your employees are going to be like, “Well, where’s my pay raise?” Yeah? Any of you live through that? Yes, if you have, you know what I’m talking about, so you’ve got to be careful with those liabilities. And the thing is having liabilities, buying them is exciting. The first, oh, you know, you’re so excited. “Oh my God, I got a new car!” But in the long run, liabilities stress us out because we have to keep paying for them and then they cost us more money in hidden ways, whereas assets are the exact opposite.
When you’re buying them, often it’s not quite as exciting. Now, it can be once you learn how amazing it is. But the thing with assets is they give back to you every single day. It’s that pride of ownership, looking at real estate that you own, looking at the stocks that you own, and watching them go up and down. It’s just an amazing thing and that’s why as part of this six-part series on finances, I’m going to talk to you about the stock market and about real estate.
In the next episode, I’m going to explain to you why assets are so incredibly valuable to have and why liabilities crush you by talking to you about the Seven Year Rule. And what happens if you can have seven years of patience in your life on anything, I want to tell you what happens, and it will blow you away.
All right, so join me in the next episode as I talk to you about something that Einstein referred to in the following way. He said, “It is the Eighth Wonder of the World: He who understands it, earns it. He who does not pays it,” and yes, he was referring to the Titanium Seven Year Rule. Well, he was referring to compound interest, which is what the Titanium Seven Year Rule was based on, so join me next time and we’re going to talk about that. It’s a great episode; you’re going to love it. And hey, get out there today, make sure you cut those expenses, focus on acquiring assets and not liabilities. We all have to have some liabilities and we all have to have some of those doo-dads. But get a couple of those but spend most of your money acquiring assets as much as you can. And get out there today, like every other day and always, lead with your heart.
Thanks for listening to Titanium Life Radio with Arman Sadeghi, here on the Apollo Podcast Network. For more information or to subscribe to this podcast, visit titaniumsuccess.com/podcast.
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