Saturday, December 27, 2008

Asset vs Liability: What la wei?

We always hear some people bragging around to their friends and families about what they have, and of course these faggots piss them off, especially when that particular word comes out.

"Ouh, I have assets, see."

Many people think that they have assets when they do have not. And this particular mindset makes one thinks that they are richer than another when they are not. Instead, they only have liabilities.

Let's see what those assets and liability are.

According to Robert T. Kiyosaki, an asset is something that generates money for you, and a liability is something that takes away money from you. It is that simple, actually, but when it comes to the deeper understanding it needs a bit more thinking and justifications to differentiate one to another.

We always hear that, "my assets are my car and my house." Well, is it true that they are assets?

When you own any or both a car and a house, do they generate money for you? They do not. Instead you are the one who needs to pay for the monthly payment, the bills, the petrol, maintenance and et cetera. So these both car and house take money away from you, right? So those are what we call liability.

Pure assets are things that generate money for you without you even need to do anything. It generates money even when you sleep. It generates money even when you are spending your money.

"So tell la. What are the examples? You talk cock la you. Talk talk talk for hours, like that I also can maaa..! Haiya!"

Fine. Let's see. Any of you have ASB account? See, that's an asset. You invest some money, and let it grows for a bit. It's like planting a seed, you see. You plant a seed, then you water it everyday, maybe you can put some fertilizer so it grows better. Until one day, you don't need to take care of it anymore, because it can take care of itself. And what you have then is one big tree with huge branches that provide such canopy for you and your family.

Or, you can rent out a house. Let say, you buy a house that cost you to pay MYR 500.00 per month as monthly payment to the bank that lend you money to buy the house. Then you rent out this house to somebody who is willing to pay MYR 600.00 per month to you, and he will take care of the house, including the bills, the lawn, maintenance whatsoever. End of the day, you make MYR 100.00 per month, and the house will be yours in 30 years time.

Or, you rent out a car. You buy and extra one second-hand car that needs you to pay MYR 400.00 to the bank for monthly payment. You rent it out to people for, let say MYR 10.00 per hour. Averagely per month you manage to rent the car out for 80 hours, which means you make MYR 800.00.

"Wahsai, free free got four hundred bucks ah? Then also in the end can own the car?"

Yea, but you have to remember about the maintenance and other stuffs too like initial down-payment and etcetera. But still, it is a good investment.

So start saving now, people. Who knows, in a few years time things could change somehow, relatively about your financial status. You have your monthly wage, and also you have side incomes that generate money for you easily. This is one way to change a liability into an asset. And of course, an asset can be changed into liability as well.

But this one is just a rough idea. There are a lot more thinking and justifications to do before you commit into it. Don't just buta-buta only.

"Ah I don't care la assets, liability all. I have my wife what? Best asset ever, man!"

Aiyark. That one is very hard la dey!


shnurafizah said...

im buying a house..
i just paid the booking fee..
hopes when it is completed.. i would be able to rent it..
so at the end of the day.. goyang kaki.. duit masuk.. heee... ;)

Mohamad Nazmi Zaidi said...

uh wah. dia dah start dulu. huu