How does the saying go? "It is wise to invest in what brings in money rather than what takes out money", right? I guess this saying goes in the line of or what they are actually talking about is assets and liabilities. More and more people daily make the mistake of investing into liabilities rather than assets and I will probably say they lack the information or they just don't care about their financial lives. But wait, who doesn't care about their financial lives? Nobody, right? Everyone in the long run in life wants to be financially free and live a life free of financial troubles.
Many young youths or teens this days actually need financial orientation or education, to strengthen the financial decisions in life because a little wrong move might cause unpleasant situations. As we all know that the younger ones are the future of tomorrow, we should strive as much as possible to actually educate our kids and young ones on some key and important things to know and note in the financial system.
In the case of assets and liability, as someone who is desperately trying to attain financial freedom, investing your little money in liabilities is a very wrong move because instead of you to actually attain financial freedom, you might end up in financial debts, which will be far from your dream to be financially free. Investing into liability will only take away from you and investing in something that takes away from you when trying to attain financial freedom is an unwise move.
To dive more into what this two mean, I'm going to define and explain more on what they stand for.
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Assets!
An Asset can be regarded as anything of value that can be traded or used as an exchange for money. Assets are things owned by a person and can be used as an equity to money anytime.
Liabilities!
Liabilties can be regarded as a thing of value that you owe that has an equity to money. Liabilities are somewhat like loans where you have to pay money for it sequentially.
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For example, a car can be called a liability in a sense and also be called an asset, why?
I personally observe and think that when a car is an assets, you have the car and it brings in income from time to time, in short it brings in more than it takes out.
When it is a liability, it is obvious right? It takes more than it brings in or at the worst doesn't bring anything in, this is what I regard to as a liability and what one has to abstain from when trying to attain financial freedom.
This is my take on Assets and Liabilities and what I think and understand them to be.
You all can share your opinions about this as I would be ready to engage with it all.
Assets vs liability? What do you understand about it.