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Most people think their house is an asset. Maybe that's what they've been told by their banker or accountant.
My definition of an asset is something you own that makes you money.
A liability, on the other hand, is something you own that takes your money.
So the secret to success in life? Have more incoming money from assets than outgoing money from liabilities.
It's that simple however most people live day by day. They don't save to invest in assets they only save to pay off debt.
The quickest way out of debt and to begin building assets is to make minimum payments on ALL expenses and pay off your lowest debt expense first. What do I mean by this?
Say you have the following expenses
- Monthly House Payment - $1000
- Car Loan Payment - $600
- Bank Loan - $500
- Credit Card Payment - $100
So you pay minimum on the first 3 and try to pay off Credit Card ASAP in order to knock that debt off the chart and save $100 extra each month. Most people try to knock the big number 1 off right away and they only find themselves taking longer to pay it off since the expense is so big. Start small and build your way up.
After all the debt is paid off you can begin to buy assets, if you have money to put towards assets while still having debt, that's okay too, do whatever will increase your monthly income first. If your monthly income is $5,000 and knocking your debt off a bank loan out will increase it to $5,500 but investing in real estate will earn you $600 extra each month, then maybe buy the real estate will earn a better monthly income of $5,600.
Let me repeat assets make you money and liabilities take your money.
Invest in assets so not only will you be richer but you will also be able to retire earlier.
Thanks for reading!
Isaac