Understand the Difference Between Assets and Liabilities

[Mika]

The most important lesson you need in order to manage your money is to understand the difference between assets and liabilities. The moment you understand the difference, you will understand how to build your assets and how to cut your liabilities.

Assets put money in your pocket, whereas liabilities take away money from your pocket.

Generally speaking, people count anything that they buy and have value as an asset. For example, they count your car as an asset and your house as an asset. However, in a truer sense, these are not assets, these are liabilities disguised as assets. Your house and car take money from you. You are either paying your house loan or a car loan, or you are spending money to maintain your car (fuel and maintenance) and house (insurance, repairs, etc.)

According to Robert Kiyosaki, even your retirement plan is a liability because it takes money away from your pocket every month.

You gain financial freedom only when you build assets and reduce liabilities.

 

[King bell]

If you're into business , finance, budgeting, or taxes, you've surely encountered the terms "asset" and "liability." While they seem like they would mean the same thing, it turns out that these financial terms are not interchangeable.

Assets are things that increase your wealth and will usually stay with you a while before being sold (i.e., a piece of land or property). Liabilities refer to debts or obligations (like monthly mortgage payments) that come due soon and may be paid off after some time.

What is an Asset?
An asset is anything that is owned or owed by a business or person. It can be a building, piece of land, car, computer, cash in the bank, a patent or copyright, money loaned and many other valuable items. Everything you own has some value. When assets are sold they can bring income to the owner.

What is Liability?
A liability is debts that are assumed by a business or person. It includes all obligations such as bonds and mortgages but also includes income taxes not yet paid (liabilities) and credit card balances that have to be paid off at some point in time (a future liability).

 

[Kennysplash]

There is a clear difference between asset and liability. Asset is anything valuable to you and can give you returns. Examples are landed properties, estate, investments, business, people among others. They are very important to you because they bring you profits.
Liability on the other hand is anything that takes away your money or resources one way or another. They can be vehicles, people, poor investments and many others.
Although many liabilities are actually needed in life, it is best to know the difference between then and assets and minimize them as best as you can. Always work with assets and keep liabilities to the nearest minimum.

 

[Shaf]

Like most people without proper financial literacy, I always thought that having a house and a car count as having assets. In a way, they help you reduce costs of loving and daily expenses, and can also be sold along the line for cash even more than you bought them which is why people see it as an asset.

Accumulating assets though is also not without it's own expenses. For example, my husband is into real estate and has a some extra properties for rent. These properties take a lot of money to see develop and still may require monthly or annual maintenance. The only investment that I think serves as assets without extra expenses is mutual stocks, shares and other like that where you are only receiving profits on capital.


It will be helpful if financial information is taught in schools as part of the compulsory curriculum to educate and help peopl make best decisions concerning these things.

 

[Mataracy]

It is very necessary to know the meaning of the word Asset and Liabilities.
Asset can be describe as a wealth creator i.e it is what one will use to realise or bring money in to his or her company for example. One can use Vehicle (car) make money by carrying passengers and collect money from them.
Plant and machinery is an asset also because one can use it to produce things that will inturn brings money.
But in the other way round Liability is what one possess that just meant to be taking away money or resources away. Example of this is Loan either long-term loan or short term loan. When one collect loan it is compulsory that one will just be servicing it till when it's finished.