What Are Your Liabilities or Assets?

 



Do You Really Understand Liabilities And Assets?

At the start of my much more rigorous journey to reaching my goal of becoming wealthy, I realized that I did not fully understand what assets and liabilities were. And as I asked around, I realized that there was fluctuation in the general definition of both. So let's get a bit of a deep dive into both, with examples to further help with our understanding of both terms.

Terminology Research:

Liabilities 
  • The general definition is: "something for which one is liable" (Marriamwebster)
    • The definition of Liable it: "obligated according to law or equity" (Marriamwebster)
      • Equity in economic terms is defined as: "the process to be fair in an economy that can range from the concept of taxation to welfare in the economy. It also means how the income and opportunity among people are evenly distributed." (WallStreetMojo)

  • Examples of Liabilities
    • Bank Debt
    • Mortgage Debt
    • Credit Card Debt
    • Taxes Owed 


Assets
  • Is defined as:
    • "...anything that has current or future economic value to a business." (NetSuit)
    • "the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts" (Marriamwebster)

  • Examples of assets:
    • Accounts Receivable
    • Cash or Cash Equivalents 
    • Real-estate
    • Patents
    • Trademarks
    • Roth IRA

Summary

In short, when it comes to your financial journey, you want to avoid liabilities and gain more assets. Now, there is no immediate action plan that will work with everyone's finance journey. BUT I would suggest, as I work on every day, would be to start dwindling down on your current liability list. 

Assets may seem harder to acquire, but even the smallest of steps can lead to a butterfly affect. Start doing the research on what works best for your goal. For example, I personally want to work on the Financial Lemons project more but also work on my own hobby that can bring me in another stream of income. 

Just as my previous post stated, your mindset will greatly affect your goals and the timeline behind meeting those goals. 











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