Saturday, December 28, 2013

Still trucking . . . stewardship. Rich Dad / Poor Dad.

It's been over 18 months since my pick-up started making an awful noise.  The engine sounds like it's going to drop out at any moment.  Still running, getting me from place to place when I need it.

It's been a great lesson to my kids about many things, including the fact that when something still works, it still works!  Sounds silly, I know, but our society is so prone to trash things that have only minor defects.

Several months ago I helped my daughter find and pay cash for a $900 car.  It's far from perfect, but she paid cash for it and owes no money to any for it.  It is her car.

Many years ago I read Robert Kiyosaki's book - Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!    The book has many less than favorable reviews but one gold-mine I got from the book - is a lesson I inherently learned in my childhood home, but not so clearly stated.  I understood it as this, "Buy assets, not liabilities." 

Assets, as I've taught my children, are relatively rare in the scheme of total purchases.  Most things in life are not assets.  An asset in this category of stewardship that I've taught is something that maintains its value or grows in value.  An example:  An antique dresser might cost $350 to purchase - but in most cases will always be worth that $350, and may even appreciate to be worth $500. 

Liabilities are everything that loses value.  Really bad liabilities are things that lose value and also take from other sources of value.  Nearly everything fits this category.  Even the $2.00 pants I buy at goodwill, while I buy them cheap, by the time I am done with them, they're worth $0.00.  Computers, even if they allow for a certain amount of productivity and gain in professional work, the computer itself is still a liability.  It can be used to gain income, so functions to help with other asset growth, but it is still a liability as an item. 

We all buy things and most of what we buy are liabilities, but if we only buy liabilities, we will forever be using our money for things that depreciate, never growing in any categories of "wealth" with assets. 

My daughter's $900 car is a liability.  It will not appreciate in value.  But, as a liability, it functions better than other potential liabilities because (1) it prevents her from having greater liabilities like a $200 (or more) a month car payment for month after month after month - with interest!  (2) Because of it's age and condition, insurance for it is a smaller cost than a more expensive car, saving cash assets.  And, (3) compared to a car that cost say $4000.00, if her $900 car was wrecked in a car accident, the most she can ever lose is $900.  [Of course, if the $900 car started consuming oil, or started needing major repairs, than it could begun to cost more than $900.00 in which case it might be too great a liability and need to be sold.]  As a result, my daughter gets to save more money each month from her job, the cash is an asset, that she can apply toward other potential assets or save toward a wise purchase with the next vehicle (another liability, but one that can be stewarded wisely).

We have to own things and we have to buy liabilities, but we don't have to purchase bad liabiliteMs and we can measure and think through the extent of how we steward resources toward liabilities.

Had I rushed out to get a "new" pick-up 18 months ago - I would have immediately lost money in the purchase and my insurance would have increased, costing me more out of pocket expense.  eanwhile, I've been saving some moneyso that when the pick-up truck finally does need major repair - I'm financially set to make the next purchase I need to replace it, with cash.

I'm still trucking in my pick-up and still trying to teach my kids how to be good stewards.

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