Assets, Liabilities, and the Fine Line in Between

For the elite investor, a car has never been an investment. When one says that he has to have a car so that he can go to work and time in on time, a car is just another expense. If he has a business and reasons out that he needs it so that he can go about is just a justification and is never really seeing things in an investor’s point-of-view. Grant Cardone, a renowned salesperson and a well-respected man in the sales field, prefers just renting a car so that he won’t have the personal liability associated with owning one. Such liabilities may include; usage consumption, maintenance, legal documents (which is time costly, too) and the sort. Given, a car is a thing of convenience, but the message is as clear as the waters in our Boracay Beach in the Mid-summer afternoon of March: a car is never an investment.

Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad, a savvy investor and a brilliant financial advocate, confidently says that your house is not an asset, but a liability (perhaps, the biggest one)

But before we further proceed, let us first have a mutual consent and understanding: What do we mean by investing? What is really an asset and a liability?

I would define investing (verb) as the process of making money with money (or time and energy for money). It is the proper allocation of your resources to the right asset.

It is not a second job or a part-time gig as investing doesn’t require much active participation. Though, initially you may have to put in a lot of effort and time on a project but given time, you’ll be able to reap the rewards of your harvest for money without much further need for those resources.

I would even go far as to say that investing is an art – something that would require a dynamic amount of creativity to execute. Such creativity rewards you with passive income.

Assets are anything, be it tangible or not, that will put money into your pocket. If that sounds too broad, that is because it is. Some examples of assets could be your shares from a company in the Stock Market (a.k.a Paper Assets) and through owning properties - this is Real Estate investing which I consider to be the safest of all investment classes. Liability on the other hand is anything that takes money out of your pocket (i.e. a car, house expense, or even the aforementioned assets if they didn’t perform well)

Having said all of this, can we still say that a car or a house is not an investment? Can’t we turn them into a cash flow machine or to something that can make money for us regardless of our effort?

Think for a moment to ponder this question. I know you already have the answer with you because you’re a dynamic person. I know you’re smart.

A car is not an investment and may never be considered an investment – 10 years ago. Same could be said with a house. But a disruption in technology changed all of it. Because of the ingenuity of millions of entrepreneurs - our vanguard for change – and the ever expanding sharing economy, Both a car and a house could now become a legitimate investment.

Haven’t you heard of Uber or Grab? They are apps that could easily be installed on any smart phone to alert nearby Uber/Grab drivers that you need transportation and they’ll carry you wherever you need to go. In our country, Philippines, a Grab driver’s fare is even more affordable than a taxi cab’s, making the former more preferable than the latter as the mode of transportation for commuters.

Now, if you have a car you can choose to rent it out to someone for his Uber/Grab use. So, whilst going to work, you may take your Uber/Grab driver with you and once there, you can then have him borrow the car and let him make a living out of it while at the same time you’re also making a living. He would have to pay you, of course, for borrowing such a dynamic asset. The transaction about the payment terms may depend; it could be a daily, weekly, or a monthly payment to you but still, the idea of having something (and someone) working for you is there and is very much possible and is very easy. Perhaps, as easy as writing this article to inform you that you can make an investment out of the things you thought weren’t possible before.

Another thing to consider: that wedding dress you once wore (I hope) complete with the jewelries that came with the occasion is now sitting lonely in your closet and vault for some time now, yeah? It may have caused you some fortune on that one-time event and now you don’t really know what to do with it. You would hate to impart with such a thing of beauty because it still brings the Auld Lang Syne as if it was just yesterday. Say, wouldn’t it be nice if there’s anything you can do more with it?

There is a website that could assist you in making money out of those luxuries you bought some time ago. Rent-the-Runway enables you to rent out apparels and accessories to someone on a much easier scale. It is an online service that provides designer dress and accessory rentals.

So, rather than your elegant dresses just hanging there being eaten by the termites, help someone have their dream wedding and bestow them beauty with that graceful dress of yours, then brand them a princess because of that tiara you bought some time ago, unbeknownst to you then, would now be profitable. You will make them happy for making their dream wedding come true. In turn, they will make you happy, too, because you will have earned passive income.

And here’s my favorite part: that vacation house on the beach or that extra guest room that no one has used for a long time? Let’s make an asset out of them by registering them on Airbnb (The Real Estate version of Uber/Grab) and have them rented out. At least that way, you’re not the only one working hard to earn money. These assets of yours (which were a liability before) could now prove to be a profitable investment – something that will make you money regardless of your effort and time, all because of the ever-expanding sharing economy and the ingenuity of our entrepreneurs. Now, you can treat them as diligent employees ready to work hard for you and earn you money.

You see, my valued reader, in this age it’s not so much as to what asset to acquire. It is the utilization of those assets that are important. If you’re thinking where to invest your hard-earned money – whether on a car or a property, on paper assets or commodities, or perhaps on a business venture - you can take comfort in the fact that anything could prove to be profitable in the long run – supposing you have the right arsenals in your disposal to utilize them properly. You have to be creative and be knowledgeable in order to execute these things perfectly. It all depends upon you – the wise investor – on where you will position yourself. Someone said it better, “access trumps ownership”.

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Julius Cortes is a free-spirited individual who puts the needs of those he serves first. He is passionate about Entrepreneurship, Stock Market and the Real Estate Industry and has taken upon himself the task to innovate ways to change millions of lives through them, a strong financial advocator and dreams of alleviating the lives of the poorest Filipinos through the aforementioned asset classes.