Assets. Liabilities. What are they? A liability is something that drains your bank account and an asset is something that adds to your bank account. That’s it.

Many people are surprised as to what goes into these two columns of the ledger. Let’s first go after the liability side. In filling out your financial statement, what would you put as a liability? No, you can’t put your spouse as a liability. My wife would always go on the asset side.

Your home for example. Is it a liability or an asset? If you said Liability, you would be right. Your home draws money out of your bank account each month, it does not put money back in. There are the expenses to keep it running and the interest that you pay on your mortgage. Now if you had a rental property that had a positive cash flow coming into your bank account every month, that would be an asset.

How about your automobile? Would that be a liability or an asset? Well, unless you have a vintage car or a 1969 427 L88 Corvette. Usually your vehicle that you drive, like your home, is a liability. It draws money out of your bank account just like your home does. A 1969 L88 Corvette would be an asset because the vehicle is worth about a quarter of a million dollars right now. If you can find one? You could list it on your financial statement as an asset.

Our economy has been teetering. People are watching what they spend. Rather then lining up at Starbucks every morning, some have decided to go through the drive through at McDonald’s. They’re not buying those tailor made suits anymore. They’re going to the discount stores. Today people are cutting costs any where they can.

How do wealthy people do it? They buy up all the cash flow producing assets, while all of the rest of the people are spending their money on cost eating liabilities.

Most people are ignorant when it comes to how money works. We are never taught in school how to use money and get it to work for us, instead most of us are working for our money. The wealthy know how it’s done.

It has always been drilled into our heads. Get a college degree. Find a good secure job with a good secure company. Work there for the next forty years, save and invest your money. If you do, you will be able to retire with a good secure pension and live the good life. How is that working out for you? I want to tell you first hand, it isn’t.

I retired after thirty five years of service with Ford Motor Company. I receive a pension check every month, but my savings and 401k are history. I am still very lucky in the fact that I am receiving a pension. There are some who don’t. Ford, GM and Chrysler are all struggling also.

Precious metals are great assets to have around, especially in a struggling economy. Gold and silver have been a form of currency that goes back thousands of years to the Egyptians, Romans and the China Dynasties. As the dollar goes down, like it currently is, gold and silver go up. You can put these assets on your financial statement as well.

We need to be doing what the wealthy do. Use that green paper to buy wealth building assets, not liabilities that just put a hole in your pocket.

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