Your House is not an Asset

Your House is not an Asset

“Your House is not an Asset” is a statement given by Robert T. Kiyosaki in the year 1999, during the housing Boom in the USA. And that time many people and finance gurus opposed and criticized this statement. Robert is the Author of a Ney York Times Best Selling Book, Rich Dad Poor Dad. Let me explain you that why your House is not an Asset?

You can Watch Robert’s Video Here that Why Your House is not an Asset?

According to Robert, All the Financial troubles originate from only one thing and that is – Not understanding the difference between two basic words – Assets & Liabilities. Most of the people struggle financially because they call their liabilities as Assets.

Asset means anything that puts money into your Pocket (Cashflow) while

Liability is something which takes money out of your pocket.

Now, according to the above 2 simple definitions, The House in which you live is not your Asset even though your government or banker say you this. This is because every month it takes money out of your pocket.

Now, some of you will argue that, Well, But what about the Real Estate underneath the house? It is appreciating in its price over the time so it will give me the Capital Gain. So it’s my Asset. But well, I ask you the question – Will you sell your house if it goes double or triple into its real estate price? Probably not because you have an attachment with the house in which you live. And because of this emotional attachment, you will never sell it. But rather you will all time try to protect it any how.

Now, Investment is something on which you don’t have any emotional attachment. Even if it goes down in its value, you have to sell it immediately to limit the loss. Thus, the house in which you live is not your asset.

Now, suppose if you buy a property and put it on the Rent than What? Well, in that case, it is your Asset because at the end of the month, you will get paid by the tenant and you can anytime sell your rental property without any emotional attachment to the new buyer.

Most of the people work hard for whole of their life and later on they spend all of that money behind buying a luxurious house and thinking that, It’s their Biggest Investment. People tell proudly to other people when they buy their house that - “I have just made a life time Investment” or “My House is my Biggest Asset” and so on….

But this shows their lack of Financial Education. In reality, You should put your most of the money in those Assets which put money into your pocket (Cashflow)…!!!