There are various definitions for wealth, income, liabilities, and assets. In our industry it’s important to make sure everyone is on the same page about what these mean. Our definitions come from Robert Kiyosaki and his Rich Dad Poor Dad series of books.

1. Wealth

"Wealth is a person’s ability to survive for so many number of days forward…or, if I stopped working today, how long could I survive?” -Kiyosaki

For our company, the strength of our financial wealth is determined by the quality of system in-place that produces a reasonable expectation of reliable, adequate, net livable cash flow, in perpetuity.

2. Income

When my income is derived from and dependent from me, exchanging my time for dollars, then it is on the left side of the quadrant. When my income is derived from and dependent on a quality, duplicatable system, something beyond just me, then I am potentially earning income from the right side of the quadrant. Our goal is to increasingly earn income from the right side of the quadrant.

3. Assets

“An asset is something that puts money in my pocket.” -Kiyosaki

The idea of an asset is fairly simple. Worcester Investments accrues assets in the form of Kansas City apartments. For example, we acquired the Northcrest Apartments in Riverside, MO in November 2010. After paying all the property expenses, the property produces a monthly cash flow to us and our investors. Because the Northcrest Apartments put money in our pocket, it is an asset to us.

4. Liabilities

“A liability is something that takes money out of my pocket.” -Kiyosaki

My automobile qualifies as a liability because it takes money out of my pocket by depreciating in value, taxes, insurance, and upkeep maintenance and repairs while producing no direct income to offset said expenses. If I had a loan payment on the car, then it would also take money out of my pocket. I derive no direct income from my car, so it is a net loss for me to own. My car takes money out of my pocket, so it is a liability.

Check out Robert Kiyosaki’s blog post "Do You Own a Job or a System?" for more information.