Difference Between an Asset and a Liability By Madeline Frank

Do you know the difference between an asset and a liability? My favorite definition is by Robert Kawasaki the author of “Rich Dad Poor Dad” who says “Assets put money in your pocket” and “a liability is something that takes money out of my pocket.”

An asset is an investment that keeps growing for you. The idea is to buy assets that keep earning money for you to put into your pocket. My Momma, Romayne Leader Frank, opened a savings account in the name of each of her children when we were very young. She taught us to put our chore money and our future paychecks into our accounts to start saving for the future. By the time I went to college, I had saved a nice nest egg for the future.


My Momma, Romayne Leader Frank, taught me in my high school years to make a budget of my expenses, to keep a ledger of the money going into the bank and the money to be paid out for expenses. She also taught me to put my entire paycheck in the bank, to pay all my bills, and to take out only the necessary amount for food and spending money. The remaining money went into my savings account to earn interest and increase over time with compounded interest. This account was my first asset. As a college student, I always had a job to help me with tuition and my apartment rent in New York City.

You want to buy assets that keep growing to increase your bank account. For example, if you own a rental property that you rent out and your tenant pays enough rent to cover all the taxes, insurance and up keep of the property and you still have money growing in your bank account that is an asset. You always want a positive return on your money. You want your money to increase and make more money for you to save and invest.

Over time I learned from my Grandmother, Mary Chernick Leader, my Momma's Momma, and my Father, Dr. Robert J. Frank, about studying stocks for long term investing. You would want to read everything written about the stock to make sure it is a good investment. A detailed study is necessary to do this. I would only purchase a few shares and then I would do dividend reinvesting and just watch my investment grow. Your money grows over time with compound interest.

A liability has only one function, to take money out of your pocket. A liability is a bill that you pay. Your mortgage on your house or car or any other kind of bill that takes money out of your pocket is a liability.

You want your assets to increase and grow so you have more money in your pocket.

What are the 4 things can you do to build up your wealth, your assets?

1) Put your paycheck in a savings account connected to a checking account and let the interest on your savings account compound over time. Pay your bills on time and save the rest of your earnings and do not spend your money for unnecessary things.

2) Think and carefully check on all the factors of the rental property you wish to purchase. Is the location of the property in a good area of town? What is the condition of the property? Is the property well maintained? What condition are the air conditioner, heater, plumbing, electrical, drywall, roof, windows, doors, appliances, and insulation and how are the grounds surrounding the property maintained? Check on the ownership of the property, to see if there are any liens on the property or any past due taxes. You need to know everything before you can make a decision on buying the property. Remember a rental property should bring in enough money to pay the mortgage, taxes, insurance, and maintenance for the property and leave extra money to put in your pocket, your bank account, to increase your assets.

3) If you decide to buy a stock do your homework and know all about that stock. Knowledge is the key to whether it will be a long time investment that will grow your portfolio into a nice nest egg for the future, your asset. Reinvest your stock dividends to help your assets to grow. Start small and think through your investments.

4) Think down the road about your retirement, IRA, Roth, and life insurance. Also decide on having a will or Revocable Trust to protect you and your family. Do your homework so you are knowledgeable about a product and how you can build your wealth, put more money in your pocket and build your portfolio, your assets for your future and your families.

Madeline Frank, Ph.D. is an Amazon.com Best Selling Author, sought after speaker, business owner, teacher, researcher, and concert artist. She helps businesses and organizations "Tune Up their Businesses". Her innovative observations show you the blue prints necessary to improve and keep your businesses successful. She writes a monthly newsletter "Madeline's Monthly Article & Musical Tips" and a monthly radio show "Madeline's One Minute Musical Radio Show".

If you need a speaker contact Madeline at mfrankviola@gmail.com

http://madelinefrank.com/





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