Why Are You Not Rich Yet? The Poor, Middle & Upper Class Definition of the word "Asset"
I recently received an email from an individual (who will remain nameless) that wanted to know why it was they felt like they would never get ahead financially. A feeling of being stuck in the rat race of life, struggling to never get ahead in the end. My answer to his question was simple and it paralleled the ideologies expressed by Robert T. Kiyosaki in the book â€œRich Dad, Poor Dadâ€. The answer is one that is not readily taught in our school systems. Before I give you the answer to why you aren’t rich yet, let me first ask you a couple questions and see if you can’t figure it out yourself.
Question 1: How many different assets do you own?
Question 2: How much passive income have these “so-called assets” of yours produced?
Does the second question change your outlook and perspective of the first question? The word ASSET is defined three different ways. The first way is how the poor class defines it, the second is how the middle class defines it and third way is how the upper (rich) class defines it. The way in which you define this term will ultimately define your financial well being in life (or not so well being).
The Poor Class The poor class does not define the term asset because they only have liabilities and expenses. To much of their income (over 90%) is spent on liabilities and expenses leaving little to no room to ever grow fiscally.
The Middle Class A good portion of this sites readers are from the middle class. The middle class is the most interesting of the classes because of their total misunderstanding and confusion when it comes to understanding what an asset really is. How many of you reading this article are from the middle class and many reading this article listed their house and cars and toys as assets? This is where the confusion sets in and is the main reason why the middle class never “break out” and are stuck in this rat race.
So tell me middle class, how much money has that beloved house of yours (the number #1 so-called asset you own) made you in the past year? Don’t forget to deduct the mortgage costs, electricity, heating, taxes (oh my gosh the taxes!), cable, Internet to read this site and all the other expenses associated with owning a house. Sure your house might go up in value, but is it going to increase at a rate that is faster than the expenses it consumes? If you answered yes to that question then please send us an email so we can come live where you live. The real answer is of course not! Your house isn’t an asset unless you are renting it to someone else and they are covering all your expense and then some.
Or how about that car or boat you bought last summer? How much passive income has that made for you? My point is this: the middle class buy liabilities that they THINK are assets. The amount of money they make is irrelevant. The more money they make, the more liabilities they acquire. Its a vicious circle that leaves many families left wondering why even despite the raise they got, are still in no better position fiscally then they were in before. Its because they don’t understand money and more specifically its because they don’t understand the definition of the word “ASSET”. The quicker they figure out this out, the quicker they will get out of this rat race.
The Upper Class The upper class buys assets that are assets. Infact, they typically own so many assets that the passive income produced by each only feeds the fire. Ever hear the phrase “money finds money” or the “the rich get richer”. You think this is buy accident? The reason the rich get richer is because they understand how money works and recognize real assets that generate passive income to pay for all their expenses vs. liabilities. Do you think the rich ever have to dip into that precious paycheck? Of course they don’t cause their assets are paying for everything. The rich then go and use the money produced from the assets to guess what…….. you are correct! BUY MORE ASSETS!
The day the amount you earn via passive income from your assets exceeds your expenses, is the day you are considered rich in my book. Millions of dollars does not make you rich as we have all seen those lotto winners go broke a year or two after they win. This is because they don’t understand the above. They buy liabilities and more money will never solve their lack of financial understanding.
Now scroll back up to the top and ask yourself those two questions again. Does your answer differ from when you started reading this article?