There are many ways to build wealth, but one thing to keep in mind (Or learn) is the difference between an asset and a liability. In this quick post I am going to define these terms and give you a tip to build massive wealth.
To start off, you want to think of an asset as something that makes you money. There are many things you can create or buy that will make you money. It’s often heard that a car is a liability. I agree with that statement only if you have a car payment. I believe you should have a used car, payed in full, unless you already have assets that pay the car payment.
Why do I believe a vehicle with no payments isn’t a liability? You typically use your vehicle to go make money, whatever your job may be, it gets you there and typically quicker than most methods. Thus, saving you time as well. Now, good, common assets can be real estate, writing books, leasing a car out, dividend stocks, a successful website, and most importantly, a business you create. All of these things can be making you money while you sleep and that is what you want.
A liability on the other hand is pretty much something that takes your money. So, buying a very expensive home you can’t really afford, a brand-new car, subscriptions to some services you don’t really need, etc. Liabilities are clearly bad and will slow your path to wealth more than you’d expect. That’s why it’s important to be smart with your money. What do I mean by that? That’s what my tip is for:
Before you buy anything, think if it’s an asset or liability. If it’s a liability, don’t buy it. You want to save that money and buy as many assets as you can. Keeping track of what you buy and limiting it to only assets will have you making passive income a lot sooner that what you’d imagine. It all takes time, but commit to it and you’ll have a nice cash cow.