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What is an asset? What is a liability? A liability is something that depletes your bank account, and an asset is something that adds to your bank account. That's about as basic and it gets.
There are many items that fall into these two categories that may surprise you. So let's cover first, the liability column. What kind of items do you think you might consider a liability in your financial statement? Some would say their spouse is a liability. Not my wife. She is definitely in the asset column for me.
Do you think that your home is a liability or an asset? It is a liability. It costs you money every month to run your house. All the maintenence costs, taxes, and not to mention the interest that you pay on your mortgage. Every month your home is costing you money, not giving you money. Unless of course you have a rental property. If you are doing it right, this rental property should be putting a positive cash flow into your account.
What about your automobile? Liability or asset? Yes it is a liability. The vehicle that you drive will cost you money, unless you have a 1969 427 L88 Corvette. If you can find one, they are probably worth around a quarter of a million dollars. You could put that on your financial statement for sure. But since we don't have one of these magnificent automobiles, your vehicle is a drain on your budget.
Our economy has been teetering. People are watching what they spend. Rather then lining up at Starbucks every morning, some have decided to go through the drive through at McDonald's. They're not buying those tailor made suits anymore. They're going to the discount stores. Today people are cutting costs any where they can.
What do the wealthy do? They are buying up income producing assets, while all the rest of us are buying up expensive money draining liabilities.
Learn a lesson from the wealthy. Instead of working so hard for your money, learn how to get your money to work hard for you. None of us had a course in school on how this concept could work.
It has always been drilled into our heads. Get a college degree. Find a good secure job with a good secure company. Work there for the next forty years, save and invest your money. If you do, you will be able to retire with a good secure pension and live the good life. How is that working out for you? I want to tell you first hand, it isn't.
I retired after thirty five years of service with Ford Motor Company. I receive a pension check every month, but my savings and 401k are history. I am still very lucky in the fact that I am receiving a pension. There are some who don't. Ford, GM and Chrysler are all struggling also.
With the falling dollar, precious metals, such as gold and silver, are always good investments. These metals go way back into the Roman and Egyptian days, when they were used as currency. They have always held their value and can be put in your financial statement as an asset.
We need to be doing what the wealthy do. Use that green paper to buy wealth building assets, not liabilities that just put a hole in your pocket. |
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