Broke people buys stuff
Middle class buys liabilities
Rich folks buys assets.
Often times, people find it quite difficult to distinguish between Asset and Liabilities
Accounting standards defined an asset as something your company owns that can provide future economic benefits; Cash, inventory, accounts receivable, land, buildings, equipment. Liabilities are your company's obligations either money that must be paid or services that must be performed.
In order words, Assets pays you whilst Liability costs you.
Or better put an asset is something that you OWN while a liability is something that you OWE.
Let me share this true life story that happened in Nigeria to portray this point properly.
SHINA PETERS VS JIM OVIA
In 1990, Shina Peters built a house with N20,000,000 (~$55,530). The same year, Jim Ovia started Zenith Bank with the same amount.
Today, you and I don't have a room in Shina's house but might have an account in Jim's bank.
Shina's house was built in Iju Lagos and remains there till date.
Jim's bank started in a corner and now has over 500 branches in Nigeria, and many international branches.
Millions upon millions transact business in Jim's bank daily.
Shina's house is becoming dilapidated...in 2015, he spent more money to renovate the house and bought a Nissan Pathfinder with N10,000,000 (~$27,500) additional liability, while in the same 2015, Jim's bank made a huge profit of N105,700,000,000 (~$294,000,000)
Zenith bank employs hundreds of thousands, and feeds their families.
This is the difference between Assets and Liability. This is a practical life scenario of the difference between Asset and Liability.
Spend the little money you have today wisely.
The Porsche cars of today will become obsolete in 10 years time.
Your house could be an asset or a Liability.
If you built a house and gave part or all of it for real estate investment definitely, you have a valuable asset.
A house built basically for residential purpose is a Liability.