Rich Dad:Learned the vocabulary of finance – "Your words are the most valuable tools you have."
This is really ironic considering his usage of "asset" and liability."
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
/facepalm
In States a fresh law is looked upon as a remedy for evil. Instead of themselves altering what is bad, people begin by demanding a law to alter it. ... In short, a law everywhere and for everything!
~Peter Kropotkin
This is assuming the house is mortgaged, obviously. The house is shorthand for the mortgage. That's one of the reasons I posted it. It's a dire fallacy to see a house an asset if you don't own it. It's negative cashflow. The part about risk is also noteworthy.
In his book, he defines asset as something that inflows cash and a liability as something that outflows cash.
Caley McKibbin:This is assuming the house is mortgaged, obviously. The house is shorthand for the mortgage. That's one of the reasons I posted it. It's a dire fallacy to see a house an asset if you don't own it. It's negative cashflow. The part about risk is also noteworthy.
Incorrect. In keeping with Kiyosaki's definition, a "liability" is something that "takes money out of your pocket." Even if you do not have a mortgage on your house, it is still costing you. Taxes, insurance, maintenence and overall upkeep, as well as any improvements you wish to make over the years...your primary residence takes money out of your pocket.
Unless you work some way of turning your home into a money-making business (e.g. you rent out rooms like Mrs. Gump), and the money it brings in meets or exceeds these costs, your house is a liability, whether you owe money on it or not.
You read that book? In his Cashflow game mortgages are liabilities and the paid prices are assets regardless of positive or negative cashflow.
Yes, I'm quite familiar with Kiyosaki and his works. Although I'm not sure what point you're trying to make. An asset puts money in your pocket. A liability takes money out. If something is cashflow negative, it is a liability. Again, unless you've made some kind of business out of your house (literally meaning the house itself generates income, like if you rent out rooms for an amount equal to all the bills you have to pay on the house, for example), then your house is costing you money whether own it outright or not.
I thought you were being sarcastic. The game uses normal accounting. If you can sell something for a positive sum I call it an asset. Everything has "upkeep". I.e., nothing lasts forever. I suppose you could consider the likely costs until the point of selling it in a more overarching view of asset/liability.
What are you even talking about? You said
This is assuming the house is mortgaged, obviously. The house is shorthand for the mortgage. That's one of the reasons I posted it. It's a dire fallacy to see a house an asset if you don't own it.
And my entire point was that that is misleading. "House" is not shorthand for "the mortgage." Calling a house a liability is not assuming the house is mortgaged. My whole point was that (in Kiyosaki's terms), the house is a liability regardless of whether there is a mortgage or not (again, unless of course the house generates an income from rented rooms or some other venture).
How the hell is my home a liability?
scineram How the hell is my home a liability?
scineram
Hey! My Intro to Financial Accounting course is able to help! How a home is recorded, for financial at least- and it's double-entry bookkeeping, is when you buy your house, your cash(asset) goes down by your down payment amount, but your assets (physical stuff- typically called what you want it to be called) goes up by the full price of the house. This leaves your assets exceeding your liabilities (ignore paydays unless you want to call them accounts receivable), but that mortgage you took out is entered under a liability.
Ex.) you buy a $100k house, $20k down, $80k on credit(mortgage).
This increased your assets(non-cash) by $100k, reduced your assets(cash) by $20k, leaving a net of $80k, which is the same as the liability of your $80k mortgage.
Why a mortgage may be considered a liability is that it is a collaterallized loan- ie your have to keep paying that special loan, or the bank kicks you out- like a car loan, or they take your car, etc.
In this scenario the house is of course worth more than $100 K - otherwise you would have kept the cash. To clarify, it is a liability in strictly monetary terms.
Aristippus In this scenario the house is of course worth more than $100 K - otherwise you would have kept the cash. To clarify, it is a liability in strictly monetary terms.
Aristippus
Yes, I was just looking at the monetary side, not the actual, internal value- my mistake.
I listened to the audiobook version.
scineram :How the hell is my home a liability?
I would think that the rich dad, instead of saying "how can I afford that?", would say: "Now why would I buy a stupid thing like that?"
That is a different issue, whether you will benefit from x. The issue here is the mentality to progress.
Here's another reason why I don't like Kiyosaki: He says that he doesn't sell his "assets" because doing so would create a taxable event; thus, he prefers to hold on to the "asset" and receive its cashflow (dividends, interest, etc.). But those cashflows create a taxable event too!
Catching up on the Schiff show, are we?
No. I listed to the latest episode of Gold Seek Radio.
Damn. That was actually my first guess but I decided to go with Schiff. He was on that show a few weeks ago too. I should have known, since Gold Seek was more recent.
Caley McKibbin: "I'm not interested in money." "Money is power."
That doesn't appear to agree with this:
The film further shows that, while making money and the profit-and-loss test are the crucial signs and seals of commercial success, in the long run, the drive for money was not the fundamental motivation for the creation of Facebook. Zuckerberg is shown as not caring about money. He cares about doing something creative, great, and pathbreaking. He cares about making a dent in the universe.
Zuckerberg just bought a mansion: http://celebs.gather.com/viewArticle.action?articleId=281474979297843
Maybe Zuckerberg didn't care about money in the short run (first 7 years).
John James: Damn. That was actually my first guess but I decided to go with Schiff. He was on that show a few weeks ago too. I should have known, since Gold Seek was more recent.
Also in the episode, Kiyosaki said something along the lines of "I don't buy mining shares, I start mines from scratch."
I think that's just another illustration of Kiyosaki's oversimplification style of teaching. I think he's not really as dense as he could be made out to be with some of his writings. Just take a look at the OP and this thread. If you take his definitions and his viewpoint too literally, it could cause a lot of problems, but if you come from the understanding that he's just trying to drive home a point, I think it can be effective.
Whether or not it does more harm than good, I don't know. But I definitely see a benefit to the way he presents a lot of things. His cashflow quandrant is obviously another example of something really simple...but it's quite brilliant in part because of that simplicity and accessibility. He has certainly been effective in getting a lot of people to see the world through a different lens. In other words, he's more of a key to a door, or a stepping stone...he's not what's on the other side.
Zuckerberg is shown as not caring about money.
That's what they all say... until they find a way to get it.
If you take his definitions and his viewpoint too literally, it could cause a lot of problems, but if you come from the understanding that he's just trying to drive home a point, I think it can be effective.
Right. It takes some insight to get it. There's a reason that most people retire into relative poverty and it isn't because they were rich dad. In one of his videos he describes himself as dumb. He's not selling a bridge. He's mainly just inspirational.
He sells assets inside of an untaxed investment fund. Taxes are mainly designed to apply when you are receiving income that you could spend on consumption.
Btw, one thing I noticed is that most people measure wealth based on so-called "net worth". It's really an illusory concept. It consists of taking the price that something was last sold at and simply multiplying that by the number that you have, assuming that you could always sell all of it at any instant at that price, which is hardly realistic.
Caley McKibbin:Btw, one thing I noticed is that most people measure wealth based on so-called "net worth". It's really an illusory concept. It consists of taking the price that something was last sold at and simply multiplying that by the number that you have, assuming that you could always sell all of it at any instant at that price, which is hardly realistic.
I think you're really overthinking it. Just answer me this...would you rather work 80 hours/wk and make $10 million/yr, or 4hrs/wk and make $1 million. Or even $100k. In which situation would you feel "wealthier"? Not only that, but there are ways to live like a millionaire without necessarily having a million dollars. Tim Ferriss covers this quite well in his brilliant The 4-Hour Workweek.
I don't see how that is relevant to net worth.
You're the one who just said trying to measure wealth in "net worth" is illusory.
I said that net worth is illusory. Anyway, repeating what I said doesn't explain how a question about income relates to net worth.
No, I like the motivational aspect.
Here's another reason why I don't like Kiyosaki: He says that he doesn't sell his "assets" because doing so would create a taxable event; thus, he prefers to hold on to the "asset" and receive its cashflow (dividends, interest, etc.). But those cashflows create a taxable event too! He sells assets inside of an untaxed investment fund. [...]
He sells assets inside of an untaxed investment fund. [...]
In that case, wouldn't capital gains also not be taxed?
Instant wisdom is bought by fools.
Caley McKibbin:I said that net worth is illusory. Anyway, repeating what I said doesn't explain how a question about income relates to net worth.
You literally said "most people measure wealth based on so-called 'net worth'". That is a direct quote. Verbatim. You said it right up there. Then you went on for the rest of that paragraph explaining how it was a mistake for people to measure wealth based on so-called net worth because you think net worth is "an illusory concept".
And my comment to you is that you are overthinkning it. If you have a need to define net worth and say it's a non-concept, I suppose you can go ahead and do that (and I suppose that could actually be what you were doing based on the sheer amount of the paragraph dedicated to explaining that). But how you feel about the concept of net worth is completely unnecessary to make the case that measuring wealth that way is flawed.
What I as talking about is how wealth is measured. You were saying people are mistaken to measure wealth through net worth, simply because net worth is "an illusory concept". I'm saying it makes no difference whether net worth is illusory or not. It is still a mistake to measure wealth that way. Got it?
Then you went on for the rest of that paragraph explaining how it was a mistake for people to measure wealth based on so-called net worth because you think net worth is "an illusory concept".
No. I explained how net worth is illusory simpliciter; i.e., arbitrary accounting. It's a fraudulent calculation of purchasing power. I'm not talking about utility.