He said that the car is a drain in the pocket. After you pay the down payment and the monthly installments, you have to contend with the constant expenses on maintenance (oil change, regular kilometer checks, tire change, etc.). The same thing with a house, except that unlike the car, the house appreciates in value and is a good future investment. You could also save on rent. In other words, his advice was to buy the house.

Even if his take on the matter made sense, I decided to buy the car. The reason why I bought the car is basic – it will serve as an important “tool” or input in earning more. Looking back, I could say I made the right decision. The car allowed more mobility. It certainly added to the “image”, something which could be crucially important at times (although it could also be counter-productive in certain instances). The car could generate income to pay for itself (and generate enough to buy more assets and the house).

Some years after I made my decision, I came across a number of reading materials, including Robert Kiyosaki’s book, Rich Dad, Poor Dad. The book deals with financial literacy and how to get rich. The No. 1 Rule in becoming rich, according to Kiyosaki, is knowing the difference between an asset and a liability.

One of the discussions centers on how a house is not really an asset. The bottom line is to “first buy assets that will generate the cash flow to pay for the house;” otherwise, it’s a liability.

An “asset” is something that puts money in your pocket, while a “liability” is something that takes money out of your pocket. Kiyosaki points out that so many of us don’t know the difference between the two. The rule to get rich is simple – acquire more assets and avoid liabilities. Problem is, because people are not conscious with the asset-liability distinction when making purchases, so many end up acquiring more liabilities.