(Re)-Definition of an asset

The other day I ran across an interesting article on The Simple Dollar. It was buried in a book review but it really stuck with me. Here is the excerpt from The Simple Dollar review of the book "Rich Dad, Poor Dad":

"...this chapter redefines the term asset. For most, an asset is something that has value. For example, your home is an asset because it is something you own that has value...

...To Robert Kiyosaki [author], an asset is something that generates income, while a liability is anything that has costs. In other words, by this definition, your primary residence is not an asset but a liability. It may have cash value, but it doesn’t generate income. Instead, assets are forms of passive income that you control, like a rental property or intellectual property."

The reason this resonated with me was three-fold:

1. I always include the net value of our home as an asset when calculating net worth and this basically says you shouldn't....hmmmm. My take: I will continue to include the net value of our home in my net worth calculations since there is book value stored in a home. If the home has appreciated and you have been diligently paying down your loans then that counts damn it! But, one thing I did recently learn through the process of actually selling our home and "cashing out" that book value --> you need to not only subtract the amount of loans outstanding from the estimated market price, you also need to subtract the fees associated with the selling of your home...which can be up in the 8% range after everything is said and done. Seems intuitive, but I missed it...hope you don't.
   
2. Once I got past the assault on my home, I quickly realized that if you really think about it...this is true (appreciating homes excluded). You are not really going to become a millionaire if you do not have "assets" making money for you. In the simplest terms this ties directly back to investing...the more money you have invested and the better the return, the richer you will be...duh. But take it to the next level and you can apply this to every aspect of your life. With just some creative tweaking here and there why can't you turn a hobby or an interest into a revenue stream? And the more revenue streams the better...right? Just look at blogging...everybody always asks "why do you do it?". In the beginning I just wanted a way to share the little parts of our life with friends and family. While that is still the primary motivation, now it does actually pay a little (almost up to $50 now) every time someone clicks on the ads on the website. And I am still in shock that Jen is not selling her greeting cards...they really are incredible and I am sure if we did not have two kids demanding her time all day long, she would somehow find a way to make some moolah from her hobbies.
3. The last reason this resonated with me was simple...if you can displace your wage based income with other sources of asset based income...then you realize true financial freedom - plain and simple.
   

Now, clearly my blog ad revenue will not get me to financial freedom anytime soon ;-) but as we all find new and innovative ways to supplement our income, we all are working towards a more stable future, that is undeniable.