Life Lessons: 6 – Know the difference between assets and liabilities

27 Jan 2012

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This is the continuing series of the 100 lessons I have learnt in life so far. This is the Lesson number 6 .click here to read lesson number 5

In both high school and the university I studied accounting and I actually majored in accounting at the University, so the words asset and liabilities and their business definitions have been no strangers to me. And I am very sure I am not the first person from whom you have heard these two words.

In pure accounting terms, an asset is defined ‘’as a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise’’ and a liability is defined as a ‘’current obligation of an entity arising from past transactions or events’’

But why should you bother to know the difference between an asset and a liability, well because I later realised that those definitions are fine for the dictionary and the balance sheet, but for ‘normal’ everyday life these are not the definitions to live by.

The definition that makes more sense to the life I am living is this one from Robert Kiyosaki’s ‘Rich Dad and Poor Dad’ an asset is ‘what brings money into your pocket and a liability is what takes money from your pocket. Simple! And that’s the definition you need. Why? Okay let me give you an example.

If you have a car, the Accounting and dictionary definitions will tell that you have an asset but if you go by Robert’s definition well it depends on whether its bring in money into your pocket or takes it out of your pocket. So if your car was a taxi working for you what is it? Or if it was you private car for which you buy gas for each day, what is it?

So my good friend, the next time you buy anything ask yourself ”Am I buying an asset or a liability?”. My advice: spend your time buying assets and not liabilities or you will find yourself driving your car in the rat race.

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Originally posted 2010-07-14 00:00:40.

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11 Responses to Life Lessons: 6 – Know the difference between assets and liabilities

Lavinia

July 14th, 2010 at 6:24 pm

Another great post Albert!
Simple, too the point and very true!
I really love what you are doing and the vaule you are sharing with all regaring financial intelligence!
Best,
Lavinia

admin

July 15th, 2010 at 10:06 am

Thanks Lavinai, what can I say? I keep learning from leaders in the field like you, your inspiration is what keeps me going. Thanks for your support

Steve

July 23rd, 2010 at 10:26 am

That is the mark of a genus keep it up

admin

July 23rd, 2010 at 11:50 am

Thanks a lot Steve, I am just trying to do what I do best..write to inspire

Life Lessons: 7–Create a wall of greatness

July 23rd, 2010 at 3:23 pm

[...] topic.Powered by WP Greet Box WordPress Plugin This is the Lesson number 7 out of my 100. Click here to read lesson number [...]

Martin

August 2nd, 2010 at 7:38 am

Hi Yaw, I am new to your block but find your short article very inspirational and straight to the point. Coincidentally today is my birthday and therefore the appropriate time to take stock of my life and one of the areas I’ve been thinking of carefully is to invest my time in doing things as well as well as hanging around friends who will be able to contribute positively into my life i.e assets and get rid of the things and friends who are more of a liability. Well done and keep the good work.

admin

August 2nd, 2010 at 7:48 am

Hi martin, I am happy you have found something useful on my blog. I like you idea of taking stock of your life, we all have to take time off to reflect on how far we have come and what we want to achieve with the rest of our lives. I wish you all the best in this endeavour….and of course you need those friends that will help you achieve your goal in life.

Isaac Neequaye

August 28th, 2011 at 8:49 am

Hello Albert, I just stumbled into your blog out of curiosity. It was one of the links on Nana Damoah’s blog page, and this was the first post I sampled. I like what I have seen and will take the time to look at a few more. Most likely you’ve found a ‘follower,’ ha ha! Have a good day and keep up the good work.

Etsuah

December 21st, 2011 at 8:34 am

Hello Albert your words are more than just words. Your message only did not made an interesting reading but also inspired me to continue with a life investment..im 20years of age and i was looking on google to find how to calculate for the price of epack when i saw your page….Keep it up God bless you

admin

December 22nd, 2011 at 8:22 am

Dear Isaac, thanks for you words, I am happy you found my writing useful, I look forward to catching up with you one of these days

admin

December 22nd, 2011 at 8:25 am

Hi Etsuah
I am happy to know I have been of some help to you, I recommend you read the book, the Riches man in Babylon…In as much a money in itself does not guarantee happiness, a plan to achieve financial independence gives peace of mind and makes live worth living

Albert Yaw Opoku

Life Lessons: 6 – Know the difference between assets and liabilities

11 Responses to Life Lessons: 6 – Know the difference between assets and liabilities

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