If you have heard of Robert Kiyosaki, you've learned the difference between an asset and a liability. The difference is in what puts money into your pocket and typically grows in value at the same time, vs what takes money out of your pocket whether or not it grows in value.
And, the interesting thing is that something can be used as both an asset and a liability.
FOR EXAMPLE, REAL ESTATE
Many people who are homeowners, think they're "in real estate" (by homeowners, I mean people who own a house to live in). If you're one of those people, STOP. You're NOT in real estate. You own a liability.
On the other hand, if you take that same piece of real estate, and make it into a rental home, you are in real estate. Makes sense?
Now, how do you obtain assets? Well, you can either buy them, or make them. Simple. It either requires time, money, or both. Usually, assets are purchased.
And, because assets put money into your pocket, and you use that same money to buy the assets, what you do with your money will determine your financial freedom. When you earn money, you can either buy the goodies you've always wanted (a boat, a house, new shoes, etc), or you can buy the assets that'll buy those same goodies.
You know you're financially free (or, escaped the "rat race" according to Kiyosaki), when the money your assets produce (passive income), is greater than your consistent expenses. Therefore, if something bears consistent expenses (rent, mortgage, car payments, etc), your goal should not be to "make more money at work", "get a raise", "save money", or whatever. It should be to obtain an asset (create or buy) that'll pay for that consistent expense, keeping you financially free.
A job cannot be passed down and neither does it grow in value. And money in your savings account not only loses value due to inflation, but also disappears when you spend it.
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