Assets – Liabilities. What\’s The Difference?
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.
What about your home? Liability or asset? You\’re right. It is a liability. Every month your home is costing you money to keep it running. There are taxes, utilities, and interest on your mortgage payments. A rental property would be an asset because you would be making money off of it each month, not putting money out.
Your car! Liability or asset? If you said a liability, you would be right. I don\’t care what kind of car you drive, it costs you money to maintain that vehicle. Unless you have a rare one, like a 1969 427 L88 Corvette. That would cost you about a quarter of a million dollars, if you could find one, and you certainly could put it on your financial statement.
With a struggling economy, people are looking to save money anywhere they can. No more latte\’s at Starbucks every morning. You see them at the McDonald\’s drive through now. Those nicely tailored suits that you see are coming from the discount stores. People are looking to increase income and cut down on spending.
The wealthy invest in assets and all the others buy liabilities. Remember, liabilities drain your reserves and assets build your wealth.
We need to listen to the wealthy. Most of us were never taught how money works. There was no class in school that showed you how to get your money working for you. In stead we are working long and hard for our money.
I was always told to go to college. Get a good paying job at a good secure company. Work the next forty years and save a lot of money, invest in mutual stock funds, and you will be able to retire, collect a pension and live a long life. How is that working out for most Americans today? I here to tell you, it doesn\’t work that way anymore.
I worked for Ford Motor Company for 35 years. I am retired from my service to Ford now, and I receive a pension, but my 401k is gone. I am one of the fortunate ones in that I still have a check coming in every month from my pension, but that\’s not guaranteed. The auto companies are struggling as well.
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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