Page 59 - Rich Dad Poor Dad for Teens: The Secrets about Money--That You Don't Learn in School!

|
-----------------------------------+
| Assets | Liabilities |

| | |
|_________|____________|
The above box is an Income Statement, often called a Profit and Loss
Statement. It measures income and expenses. Money in and money out. The
bottom diagram is the Balance Sheet. It is called that because it is
supposed to balance assets against liabilities. Many financial novices
don't know the relationship between the Income Statement and the Balance

Sheet. That relationship is vital to understand.
The primary cause of financial struggle is simply not knowing the
difference between an asset and a liability. The cause of the confusion is
found in the definition of the two words. If you want a lesson in confusion,
simply look up the words “asset” and “liability” in the dictionary.
Now it may make sense to trained accountants, but to the average

person, it may as well be written in Mandarin. You read the words in the
definition, but true comprehension is difficult.
So as I said earlier, my rich dad simply told two young boys that “assets
put money in your pocket.” Nice, simple and usable.
“This is Cash Flow pattern of a liability.”
+------------------------+
|Income |

|-------------------------
| Expense |
+-----|\-------------------+
| \------------------------------>
---------------------------|--------+
| Assets | Liabilities |

| | |
|_________|____________|
Now that assets and liabilities have been defined through pictures, it
may be easier to understand my definitions in words.
An asset is something that puts money in my pocket.
A liability is something that takes money out of my pocket.
This is really all you need to know. If you want to be rich, simply spend

your life buying assets. If you want to be poor or middle class, spend your