{"id":2683,"date":"2021-01-25T23:14:04","date_gmt":"2021-01-26T04:14:04","guid":{"rendered":"https:\/\/smartlivingscientist.com\/?p=2683"},"modified":"2021-01-31T13:02:15","modified_gmt":"2021-01-31T18:02:15","slug":"assets-vs-liabilities-the-key-to-financial-wealth","status":"publish","type":"post","link":"https:\/\/smartlivingscientist.com\/assets-vs-liabilities-the-key-to-financial-wealth\/","title":{"rendered":"Assets vs. Liabilities &#8211; The Key to Financial Wealth"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"2683\" class=\"elementor elementor-2683\">\n\t\t\t\t\t\t<div class=\"elementor-inner\">\n\t\t\t\t<div class=\"elementor-section-wrap\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-ca7a115 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"ca7a115\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-af0307a\" data-id=\"af0307a\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-08a020d elementor-widget elementor-widget-text-editor\" data-id=\"08a020d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Knowing and understanding the difference between assets and liabilities is the key to financial wealth. Many of us may think that making more money from our jobs will eventually lead to wealth but that&#8217;s usually not the case unless we make millions from our jobs.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-1635448 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"1635448\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-12abb3d\" data-id=\"12abb3d\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-ec4f462 elementor-widget elementor-widget-text-editor\" data-id=\"ec4f462\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>In order to DNA any kind of wealth, we need to have the key nucleobase:\u00a0<strong>A<\/strong>ssets &#8211; the A equivalent to\u00a0<strong>A<\/strong>denine in DNA.<\/p><p>We need to acquire more assets than we have liabilities. Not only that, but we must be able to tell whether something is truly an asset. There are some things that we think are assets but in reality, they are actually liabilities under certain circumstances.<\/p><p>For instance,\u00a0<strong>did you know owning a home can be either an asset or a liability?<\/strong>\u00a0It really depends on whether or not you live in it and how much it costs you to own, as well as the opportunity cost for owning the home.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-e8cc0cc\" data-id=\"e8cc0cc\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1c99cdc elementor-widget elementor-widget-image\" data-id=\"1c99cdc\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-image\">\n\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1024\" height=\"1024\" src=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?fit=1024%2C1024&amp;ssl=1\" class=\"attachment-large size-large\" alt=\"\" srcset=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?w=2500&amp;ssl=1 2500w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?resize=300%2C300&amp;ssl=1 300w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?resize=1024%2C1024&amp;ssl=1 1024w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?resize=150%2C150&amp;ssl=1 150w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?resize=768%2C768&amp;ssl=1 768w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Structure-of-DNA-2.jpg?w=2000&amp;ssl=1 2000w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a181ce1 elementor-widget elementor-widget-spacer\" data-id=\"a181ce1\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-42445d3 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"42445d3\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-1d2aa50\" data-id=\"1d2aa50\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-65a8be7 elementor-widget elementor-widget-text-editor\" data-id=\"65a8be7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Where we typically get into financial trouble is\u00a0<strong>when we acquire liabilities that we think are assets<\/strong>.\u00a0 Acquire assets and you will create wealth. Acquire liabilities and you will fall into debt.<\/p><p>So, let&#8217;s understand the difference between assets and liabilities so we can start building wealth and live the dream life.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-09719fe elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"09719fe\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-001a779\" data-id=\"001a779\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-8190b31 elementor-widget elementor-widget-heading\" data-id=\"8190b31\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">Difference between assets and liabilities<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b943b27 elementor-widget elementor-widget-text-editor\" data-id=\"b943b27\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>To simply put it, the difference, according to Robert Kiyosaki who is the author of the #1 personal finance book of all time,\u00a0<a href=\"https:\/\/amzn.to\/3iv6Uuu\" target=\"_blank\" rel=\"noopener\"><strong>Rich Dad Poor Dad<\/strong><\/a>\u00a0(affiliate link), is one that puts money in your pocket and the other takes money out of your pocket.<\/p><p>Can you guess which is which?<\/p><ul><li><strong>Assets:<\/strong>\u00a0Anything that puts money in your pocket, whether you work or not.<\/li><li><strong>Liabilities:\u00a0<\/strong>Anything that takes money out of your pocket.<\/li><\/ul><p>I really like how Robert made these terms so simple. Even though these definitions are not the official ones as defined in accounting and finances, they&#8217;re easy to understand. They make identifying what to get in order to create wealth from a financial standpoint.<\/p><p>If I were to ask you how you would describe an asset and a liability, what would you say? I know I would have said assets are things that I own that have monetary value, such as a car or a house.<\/p><p>However, when we use these simple definitions, we can see that a car and a home are both liabilities because they take money out of our pockets. For many of us, we finance both things &#8211; we have a car payment and a mortgage. Both also require money to maintain.<\/p><p>It may seem obvious that a car is a liability, but a home is one that causes the most confusion so let&#8217;s talk about that first.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d809871 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"d809871\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-a460ed7\" data-id=\"a460ed7\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-6dd81c2 elementor-widget elementor-widget-heading\" data-id=\"6dd81c2\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">A house is either an asset or a liability<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a41b06d elementor-widget elementor-widget-text-editor\" data-id=\"a41b06d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Owning a house can either be an asset or a liability &#8211; it really depends on whether you are living in it (i.e. a home) or renting it for someone to live in (i.e. investment property).<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b463d48 elementor-widget elementor-widget-heading\" data-id=\"b463d48\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Why a home is a liability<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-04024f1 elementor-widget elementor-widget-text-editor\" data-id=\"04024f1\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p><strong>Buying a<\/strong><span data-slate-leaf=\"true\" data-offset-key=\"152:0\"><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">\u00a0home (i.e. house to live in), like renting, is a liability<\/span><\/strong><\/span><span data-slate-leaf=\"true\" data-offset-key=\"152:1\"><span spellcheck=\"true\" data-slate-content=\"true\">\u00a0because it takes money out of your pocket &#8211; you have to pay a mortgage and property taxes. This is not to say that renting is always better &#8211; which is better largely depends on your personal needs and what you do with the money you save.<\/span><\/span><\/p><p><span data-slate-leaf=\"true\" data-offset-key=\"152:1\"><span spellcheck=\"true\" data-slate-content=\"true\">And yes, like everyone says, owning a home is an investment. However, you are investing in a liability in exchange for things you cannot assign a monetary value to. Things like having privacy, flexibility, and convenience, which you may not be able to get when renting.<\/span><\/span><\/p><p>Sure, your home appreciates over time and you can likely sell it for more than what you bought it for.<\/p><p>But, the amount of money you would have paid in total interest, property taxes, renovations, among other things over the time of owning your home, in most cases, will exceed the &#8220;profit&#8221; you get when you sell. There is also potentially a huge opportunity cost such as missing out on other investments that may generate greater profits.<\/p><p>To give you an example, I will use my home and what it cost me to own it thus far. I will then compare that with what I can expect to get when I sell it. You can read about it here (coming soon).<\/p><p>Most people will tell you that your home is an asset. Even those who offer you loans will often see what assets you have and they will view your home as an asset. But when you think of assets and liabilities with these simple definitions, it&#8217;s easy to see that a home is a liability.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-72de6f6 elementor-widget elementor-widget-heading\" data-id=\"72de6f6\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">A house as a rental property is an asset<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-564154a elementor-widget elementor-widget-text-editor\" data-id=\"564154a\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p><span data-slate-leaf=\"true\" data-offset-key=\"158:0\"><span spellcheck=\"true\" data-slate-content=\"true\">A house\u00a0<\/span><\/span><span data-slate-leaf=\"true\" data-offset-key=\"158:1\"><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">can be an asset<\/span><\/strong><\/span><span data-slate-leaf=\"true\" data-offset-key=\"158:2\"><span spellcheck=\"true\" data-slate-content=\"true\">, but only when it is rented to others.<\/span><\/span><\/p><p><span data-slate-leaf=\"true\" data-offset-key=\"158:3\"><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">This is because your tenants are paying your mortgage for you\u00a0<\/span><\/strong><span spellcheck=\"true\" data-slate-content=\"true\">so your house is not taking any money out of your own pocket<\/span><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">.\u00a0<\/span><\/strong><span spellcheck=\"true\" data-slate-content=\"true\">Any maintenance or repairs needed for your rental property can be paid or covered in part with your monthly rental profits. Either way, you are not using your own money to cover the cost of owning the house whereas everything would come out of your pocket if the house was your home.<\/span><\/span><\/p><p><span data-slate-leaf=\"true\" data-offset-key=\"158:3\"><span spellcheck=\"true\" data-slate-content=\"true\">It is still an asset even if you live in it as long as you rent part of it and the rent is enough to cover the mortgage. This is in fact, the best scenario for saving money and owning a house &#8220;for free&#8221; but only if you are willing to share part of your home with people.<\/span><\/span><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-5f06073 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"5f06073\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-920a062\" data-id=\"920a062\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-fbe67e6 elementor-widget elementor-widget-heading\" data-id=\"fbe67e6\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">Credit cards are also either assets or liabilities<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e8bc0f0 elementor-widget elementor-widget-text-editor\" data-id=\"e8bc0f0\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p data-key=\"161\">Credit cards can also be either assets or liabilities depending on how you use them.<\/p><p data-key=\"161\"><span data-key=\"162\"><span spellcheck=\"true\" data-slate-content=\"true\">When it comes to credit cards, many may think that they&#8217;re bad because there&#8217;s a lot of credit card debt in the United States. In fact, according to the\u00a0<a href=\"https:\/\/www.cnbc.com\/select\/us-credit-card-debt-hits-all-time-high\/\" target=\"_blank\" rel=\"noopener\"><strong>recent data from the Federal Reserve Bank of New York<\/strong><\/a>\u00a0released on February 11, 2020, credit card debt hit a record high of $930 billion.\u00a0<\/span><\/span><\/p><p data-key=\"161\"><span data-key=\"162\"><span spellcheck=\"true\" data-slate-content=\"true\">That&#8217;s a lot of debt and a lot of people with credit card debt. It&#8217;s no wonder why so many people avoid using them.<\/span><\/span><\/p><p data-key=\"161\"><span data-key=\"162\"><span spellcheck=\"true\" data-slate-content=\"true\">But credit cards can be your assets because they reward you for using them and they put money in your pocket. You can get cash back for using credit cards and you can even get &#8220;free&#8221; travel and lodging.<\/span><\/span><\/p><p data-key=\"161\"><span data-key=\"162\"><span spellcheck=\"true\" data-slate-content=\"true\">However, credit cards can also be a liability if you are not careful in paying your balance off completely every month to avoid interest. Credit card interests are insanely high (as high as 25%), easily negating any reward you get and ruining your credit.<\/span><\/span><\/p><p data-key=\"165\"><span data-key=\"166\"><span spellcheck=\"true\" data-slate-content=\"true\">When used correctly, credit cards are assets. All it takes is to use them responsibly and treat them like your debit cards and how you normally would use cash.<\/span><\/span><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-9dda219 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"9dda219\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-083d43a\" data-id=\"083d43a\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-cae28cb elementor-widget elementor-widget-heading\" data-id=\"cae28cb\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">Acquiring assets is key to financial wealth<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-9c2748b elementor-widget elementor-widget-text-editor\" data-id=\"9c2748b\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>One of the key nucleobases needed to DNA financial wealth is\u00a0<b>A<\/b>ssets. Buying or building assets and avoiding liabilities, especially liabilities that we think are assets, will eventually lead to financial wealth.\u00a0<\/p><p>The ideal situation is one where we have many more assets than we do liabilities. The more assets we have, the more income we will have. Once the income from our assets can cover our expenses and liabilities, we will start to accumulate wealth.<\/p><p>To better understand this, let&#8217;s look at a diagram of the cash flow for the typical person and the ideal cash flow for creating wealth, as well as common examples of assets and liabilities.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b268741 elementor-widget elementor-widget-heading\" data-id=\"b268741\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Typical and ideal cash flow<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ac877d1 elementor-widget elementor-widget-text-editor\" data-id=\"ac877d1\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Before we get into the cash flow diagram, here are a few definitions we need to know.<\/p><ul><li data-key=\"96\"><span data-key=\"97\"><strong><u data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">Income Statement<\/span><\/u><\/strong><span spellcheck=\"true\" data-slate-content=\"true\">: Financial statement that measures your income and expenses &#8211; money in and money out. It is also often referred to as a Profit-and-Lost Statement.<\/span><\/span><\/li><li data-key=\"98\"><span data-key=\"99\"><strong><u data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">Balance Sheet<\/span><\/u><\/strong><span spellcheck=\"true\" data-slate-content=\"true\"><strong>:<\/strong>\u00a0Financial statement that lists assets and liabilities at a specific point in time. Essentially this is a snapshot of your net worth. According to Robert Kiyosaki, it\u2019s called a balance sheet because it\u2019s supposed to balance assets against liabilities.<\/span><\/span><\/li><li data-key=\"100\"><span data-key=\"101\"><strong><u data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">Cash Flow<\/span><\/u><\/strong><span spellcheck=\"true\" data-slate-content=\"true\"><strong>:<\/strong>\u00a0How your money is moved in (income) and out (expenses). The direction in which your cash moves show where your money is going and determines whether something is income, expense, asset, or liability.<\/span><\/span><\/li><\/ul><p>Now that we know the definition for income statement, balance sheet and cash flow, let&#8217;s look at the typical and ideal cash flows. The diagram below shows the relationship and the cash flow pattern for someone who has only liabilities and someone who has both assets and liabilities.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0313432 elementor-widget elementor-widget-image\" data-id=\"0313432\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-image\">\n\t\t\t\t\t\t\t\t\t<figure class=\"wp-caption\">\n\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"768\" height=\"428\" src=\"https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?fit=768%2C428&amp;ssl=1\" class=\"attachment-medium_large size-medium_large\" alt=\"\" srcset=\"https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?w=1960&amp;ssl=1 1960w, https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?resize=300%2C167&amp;ssl=1 300w, https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?resize=1024%2C571&amp;ssl=1 1024w, https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?resize=768%2C428&amp;ssl=1 768w, https:\/\/i0.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2020\/10\/Typical-and-Ideal-cash-flows.png?resize=1536%2C857&amp;ssl=1 1536w\" sizes=\"(max-width: 768px) 100vw, 768px\" \/>\t\t\t\t\t\t\t\t\t\t\t<figcaption class=\"widget-image-caption wp-caption-text\">Typical cash flow pattern compared to the ideal cash flow for creating wealth.<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-6322930 elementor-widget elementor-widget-heading\" data-id=\"6322930\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h4 class=\"elementor-heading-title elementor-size-default\">Typical cash flow<\/h4>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-65e15fc elementor-widget elementor-widget-text-editor\" data-id=\"65e15fc\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>The typical cash flow is one where our only source of income is our job.\u00a0<\/p><p>As you can see, the money from our job goes directly towards paying our expenses, some of which are created by our liabilities. Money only goes in one direction &#8211; it comes in through your job and goes right out to paying expenses and liabilities.<\/p><p>Many of us try to ensure that our income is greater than our expenses by cutting costs and trying to save as much as we can. However, many of us also tend to acquire more liabilities over time.\u00a0<\/p><p>Liabilities include mortgages, car loans, student loans, credit card debt, and other debt or loans.<\/p><p>With little to no assets to balance the liabilities, our expenses over time will eventually exceed our income, which is what ultimately leads to debt.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-af74352 elementor-widget elementor-widget-heading\" data-id=\"af74352\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h4 class=\"elementor-heading-title elementor-size-default\">Ideal cash flow<\/h4>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-740c452 elementor-widget elementor-widget-text-editor\" data-id=\"740c452\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p data-key=\"119\"><span data-key=\"120\"><span spellcheck=\"true\" data-slate-content=\"true\">The goal is to have an income that is greater than expenses and invest in acquiring assets and minimizing liabilities. As you can see from the\u00a0<\/span><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">ideal cash flow<\/span><\/strong><span spellcheck=\"true\" data-slate-content=\"true\">\u00a0pattern, money still goes out paying expenses and liabilities. But, if you notice, there is what I call the\u00a0<a href=\"https:\/\/smartlivingscientist.com\/h2o-money-the-water-cycle-for-money\/\" target=\"_blank\" rel=\"noopener\"><strong>H2O\u00a0<\/strong><\/a><\/span><a href=\"https:\/\/smartlivingscientist.com\/_wp_link_placeholder\"><strong><span spellcheck=\"true\" data-slate-content=\"true\">Money Cycle<\/span><\/strong><\/a><span spellcheck=\"true\" data-slate-content=\"true\">.<\/span><\/span><\/p><p data-key=\"121\"><span data-key=\"122\"><span spellcheck=\"true\" data-slate-content=\"true\">It&#8217;s like the water cycle, but with money. Imagine what would happen if water just went in one direction &#8211; it comes into the Earth and then goes out. We would eventually run out of water and not be able to survive.<\/span><\/span><\/p><p data-key=\"123\"><span data-key=\"124\"><span spellcheck=\"true\" data-slate-content=\"true\">The same is true with money. When we lose our jobs, our money runs out because that&#8217;s our only source of income.<\/span><\/span><\/p><p data-key=\"127\"><span data-key=\"128\"><span spellcheck=\"true\" data-slate-content=\"true\">The H2O Money Cycle continuously puts money into our pocket with assets. To create this cycle, the idea is to use our income to purchase assets that will generate money and put it back in our pocket. We then use this money to acquire more assets, which in turn will generate even more money, and the cycle repeats.<\/span><\/span><\/p><p data-key=\"129\"><span data-key=\"130\"><span spellcheck=\"true\" data-slate-content=\"true\">This is how we really start to get ahead financially. Our assets will supplement the income from our job and help pay expenses, including the ones created from our liabilities. Once we&#8217;ve acquired enough assets that can create more than enough money to cover all expenses, we would have created financial wealth.<\/span><\/span><\/p><p data-key=\"131\"><span data-key=\"132\"><span spellcheck=\"true\" data-slate-content=\"true\">Even without a job, our assets will be able to cover our expenses and more.\u00a0<\/span><strong data-slate-mark=\"true\"><span spellcheck=\"true\" data-slate-content=\"true\">Just imagine what it would feel like using all the money you earn from your job for all the things you love and anything you would like, and not having to pay a single bill or expense<\/span><\/strong><span spellcheck=\"true\" data-slate-content=\"true\">.<\/span><\/span><\/p><p data-key=\"131\"><span data-key=\"132\"><span spellcheck=\"true\" data-slate-content=\"true\">Assets include things like rental properties, stocks and bonds, IRAs, 401(K)s and credit cards, all of which are sources of additional income.<\/span><\/span><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a7aacf3 elementor-widget elementor-widget-text-editor\" data-id=\"a7aacf3\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p><strong>Related Article:\u00a0<a href=\"https:\/\/smartlivingscientist.com\/h2o-money-the-water-cycle-for-money\/\" target=\"_blank\" rel=\"noopener\">H2O Money \u2013 The Water Cycle For Money<\/a><\/strong><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-b193eb0 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"b193eb0\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-e0c3101\" data-id=\"e0c3101\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-cc206b3 elementor-widget elementor-widget-heading\" data-id=\"cc206b3\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">My past and current cash flow, assets, and liabilities<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0099b25 elementor-widget elementor-widget-text-editor\" data-id=\"0099b25\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Back in 2015 when I started my first job, my asset column was completely empty and I had student loans under my liabilities. From then until the beginning of 2020, I had acquired only one asset, but I also acquired a few liabilities.\u00a0My cash flow resembled a typical cash flow pattern.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d452002 elementor-widget elementor-widget-image\" data-id=\"d452002\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-image\">\n\t\t\t\t\t\t\t\t\t<figure class=\"wp-caption\">\n\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"768\" height=\"424\" src=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?fit=768%2C424&amp;ssl=1\" class=\"attachment-medium_large size-medium_large\" alt=\"\" srcset=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?w=1960&amp;ssl=1 1960w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?resize=300%2C166&amp;ssl=1 300w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?resize=1024%2C565&amp;ssl=1 1024w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?resize=768%2C424&amp;ssl=1 768w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/My-Past-and-Current-Cash-Flows.jpg?resize=1536%2C848&amp;ssl=1 1536w\" sizes=\"(max-width: 768px) 100vw, 768px\" \/>\t\t\t\t\t\t\t\t\t\t\t<figcaption class=\"widget-image-caption wp-caption-text\">My past cash flow pattern from 2015 to 2019 and current cash flow pattern.<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-94e4c07 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"94e4c07\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-b4f509f\" data-id=\"b4f509f\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c2f1de5 elementor-widget elementor-widget-text-editor\" data-id=\"c2f1de5\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>The only two sources of income I had was my job and my 401(K), the latter of which is not liquid or usable. I also started investing in individual stocks in 2018 but I started at a bad time and I was a novice. By the end of 2018, I ended up losing over $1,000.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a02ff4c elementor-widget elementor-widget-heading\" data-id=\"a02ff4c\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">My dog is a financial liability<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-1f06104 elementor-widget elementor-widget-text-editor\" data-id=\"1f06104\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>And YES, my dog Blue is a financial liability!<\/p><p>That&#8217;s not a typo.<\/p><p>Don&#8217;t get me wrong. She&#8217;s the cutest and sweetest dog ever and I love her to death. BUT, let&#8217;s be honest here&#8230; She takes money out of my pocket every single year. She requires food, treats, preventative medication, grooming, and toys. And OMG, don&#8217;t even get me started with the toys because all she does is rip them apart and destroy them!<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f52b317 elementor-widget elementor-widget-image\" data-id=\"f52b317\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-image\">\n\t\t\t\t\t\t\t\t\t<figure class=\"wp-caption\">\n\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1024\" height=\"618\" src=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?fit=1024%2C618&amp;ssl=1\" class=\"attachment-large size-large\" alt=\"\" srcset=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?w=2560&amp;ssl=1 2560w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?resize=300%2C181&amp;ssl=1 300w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?resize=1024%2C618&amp;ssl=1 1024w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?resize=768%2C464&amp;ssl=1 768w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/Silly-Blue-edited-scaled.jpg?w=2000&amp;ssl=1 2000w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/>\t\t\t\t\t\t\t\t\t\t\t<figcaption class=\"widget-image-caption wp-caption-text\">My dog Blue when she's all cute and sweet.<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-be070f8 elementor-widget elementor-widget-image\" data-id=\"be070f8\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-image\">\n\t\t\t\t\t\t\t\t\t<figure class=\"wp-caption\">\n\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"768\" height=\"793\" src=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/MVIMG_20191008_194121_edited.jpg?fit=768%2C793&amp;ssl=1\" class=\"attachment-medium_large size-medium_large\" alt=\"\" srcset=\"https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/MVIMG_20191008_194121_edited.jpg?w=1432&amp;ssl=1 1432w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/MVIMG_20191008_194121_edited.jpg?resize=290%2C300&amp;ssl=1 290w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/MVIMG_20191008_194121_edited.jpg?resize=991%2C1024&amp;ssl=1 991w, https:\/\/i2.wp.com\/smartlivingscientist.com\/wp-content\/uploads\/2021\/01\/MVIMG_20191008_194121_edited.jpg?resize=768%2C793&amp;ssl=1 768w\" sizes=\"(max-width: 768px) 100vw, 768px\" \/>\t\t\t\t\t\t\t\t\t\t\t<figcaption class=\"widget-image-caption wp-caption-text\">Blue when she's a crazy dog ripping apart her toys.<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4ceed2d elementor-widget elementor-widget-text-editor\" data-id=\"4ceed2d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>But that&#8217;s OK. There is no amount of money that can ever make up for all the joy and happiness she brings to my life.<\/p><p>Anyway, back to talking about cash flows.<\/p><p>Everything started to change after I bought Ramit Sethi&#8217;s book,\u00a0<strong><a href=\"https:\/\/amzn.to\/2C9mPOI\" target=\"_blank\" rel=\"noopener\">I Will Teach You To Be Rich<\/a>\u00a0<\/strong>(affiliate link). Through Ramit&#8217;s advice, I created my H2O Money Cycle and turned my cash flow into one that resembles more like the ideal cash flow.<\/p><p>In just one year I acquired a few assets and started to use the ones that I already had more often. I opened and used credit cards and online shopping portals for all my expenses where possible, which put money back into my pocket. I then used this money to fund my other assets to generate even more income.\u00a0<\/p><p>And after letting my H2O Money Cycle work for one year, it made me\u00a0<strong><a href=\"https:\/\/smartlivingscientist.com\/how-i-made-over-30k-in-extra-income-outside-my-job-in-2020\/\" target=\"_blank\" rel=\"noopener\">over $30K in additional income outside my job in 2020<\/a><\/strong>. I was completely shocked at how well it worked in just one year.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-a6858d4 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"a6858d4\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-14e5224\" data-id=\"14e5224\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-b257880 elementor-widget elementor-widget-heading\" data-id=\"b257880\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">Final thoughts<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0e94a29 elementor-widget elementor-widget-text-editor\" data-id=\"0e94a29\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Knowing the difference between assets and liabilities is the first and most important step in starting our journey towards building financial wealth. The second step is to actually start building and acquiring them.\u00a0<\/p><p>Making more money from our jobs can only take us so far. Our expenses, like taxes, tend to go up when we make more. We also have to work to earn money from our jobs and we can only work so many hours in a day.\u00a0<\/p><p>Assets, on the other hand, will keep generating income for us regardless of whether we work or not. It&#8217;s OK if you currently do not have any assets or only have one. You can start to develop and acquire assets rather quickly and can even do it in just one year like I did.<\/p><p>It&#8217;s OK to have liabilities. We need to have certain liabilities in our lives. But we should focus on building our assets first before acquiring more and more liabilities. The sooner we start, the easier it is financially to take on new liabilities.<\/p><p>When you combine your assets with your income from your job and with a little time, you WILL start to create wealth.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-adf3fca elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"adf3fca\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-df693c6\" data-id=\"df693c6\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0ce68af elementor-widget elementor-widget-heading\" data-id=\"0ce68af\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Related Articles<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-736da14 elementor-widget elementor-widget-text-editor\" data-id=\"736da14\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<ul><li><strong><a href=\"https:\/\/smartlivingscientist.com\/h2o-money-the-water-cycle-for-money\/\" target=\"_blank\" rel=\"noopener\">H2O Money \u2013 The Water Cycle For Money<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/smartlivingscientist.com\/how-i-made-over-30k-in-extra-income-outside-my-job-in-2020\/\" target=\"_blank\" rel=\"noopener\">How I Made Over $30K In Extra Income Outside My Job In 2020<\/a><\/strong><\/li><\/ul>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7acec3cd elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7acec3cd\" data-element_type=\"section\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t\t\t\t\t<div class=\"elementor-background-overlay\"><\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-bc1b5a5\" data-id=\"bc1b5a5\" data-element_type=\"column\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t<div class=\"elementor-background-overlay\"><\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-79228f44 elementor-widget elementor-widget-text-editor\" data-id=\"79228f44\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Want to become a personal finance scientist and get the latest research?<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-17c2d3a4 elementor-widget elementor-widget-heading\" data-id=\"17c2d3a4\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\"><b>Join the SLS Community<\/b><\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7fe3b694 elementor-widget elementor-widget-text-editor\" data-id=\"7fe3b694\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\">\n\t\t\t\t<p>Our emails are full of valuable and essential content specifically tailored to you to help you find the right personal finance formula.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-6a8aa291 elementor-align-center elementor-mobile-align-center elementor-widget elementor-widget-button\" data-id=\"6a8aa291\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t<a href=\"https:\/\/smartlivingscientist.ck.page\/b1af2b1a53\" target=\"_blank\" class=\"elementor-button-link elementor-button elementor-size-lg elementor-animation-grow\" role=\"button\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t<span class=\"elementor-button-text\">Subscribe<\/span>\n\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Knowing and understanding the difference between assets and liabilities is the key to financial wealth. Many of us may think that making more money from our jobs will eventually lead to wealth but that&#8217;s usually not the case unless we make millions from our jobs. In order to DNA any kind of wealth, we need &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/smartlivingscientist.com\/assets-vs-liabilities-the-key-to-financial-wealth\/\"> <span class=\"screen-reader-text\">Assets vs. Liabilities &#8211; The Key to Financial Wealth<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2719,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"spay_email":""},"categories":[14],"tags":[25,26],"table_tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v16.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Assets vs. Liabilities - The Key to Financial Wealth - Smart Living Scientist<\/title>\n<meta name=\"description\" content=\"Understanding the difference between assets and liabilities is the key to wealth. 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