It's important to master the 'basics' of the Rich Dad messages and mission
so that you have a secure and clear foundation upon which to build your
financial future. Here are a few key concepts and Rich Dad's Definitions
Assets vs. Liabilities
Asset: something that puts money in your pocket
Liability: something that takes money out of your pocket.
Is the home in which you live an asset or a liability? In Rich Dad's
world, your house is a liability. Even if you own the property with no
mortgage, you still pay property taxes, utilities, maintenance, etc. Therefore:
money is being taken out of your pocket.
Types of Asset Classes
|There are three types of assets:|
|1) Paper Assets ||This includes stocks, bonds, mutual funds, insurance
They create PORFOLIO INCOME
|2) Real Estate ||This includes residential and commercial properties
They create PASSIVE INCOME
|3) Businesses||They create PASSIVE INCOME|
This includes income derived, generally, from a job or some form of
labor. In its most common form, it is income from a paycheck. It is also
the highest taxed income, so it is the hardest income with which to build
wealth. When you say to a child, "Get a good job", you are advising them
to work for earned income.
This is income that is, generally, derived from real estate. It can
also be income derived from royalties from patents, license agreements or an established network marketing business.
In approximately 80% of passive income scenarios, the income is from real
estate. There are many tax advantages afforded with real estate investments.
This income is generally derived from paper assets such as stocks,
bonds and mutual funds. Portfolio income is, by far, the most popular form
of investment income simply because paper assets are so much easier to
manage and maintain than other types of investments.