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Assets VS Liabilities, A Modern Definition

November 3, 2021

Are you “doing all the right things” but still treading water, not making any progress on your financial strategy or investments?

So many of us spend our whole lives working hard and saving, working hard and saving… and by the end of all of that, we still feel like we don’t have enough, like we aren’t going to be able to reach our goals or have enough time to enjoy our lives with friends and family.

Well, maybe that’s because we need a new system other than what the bank is telling us. We need to redefine some of the most fundamental terms, to make them work for us.

Here's what they say...

"An asset is anything of value or a resource of value that can be converted into cash" - Investopedia

"A liability is something a person or company owes, usually a sum of money" - Investopedia

But, let’s look at an example…

You have a long-lost Uncle who passed away and left you a business. It’s a franchise. You’re a W2 employee with a day job. You put a lot of time and energy into making sure the business doesn’t skip a beat, but by the end of the first month, you make a loss of $3,000, so now you have to use your own money to cover payroll

Is this business an asset or a liability?

You might be thinking “Of course, it’s an asset, all businesses are asset, just like my home is.”

But why is it an asset? Because you can sell it and make money? Maybe you can, maybe you can’t. We need a better definition of what an asset is other than what it could be worth in the future.

Our definition of Assets and Liabilities

Asset VS Liabilities, Rich Dad Poor Dad, Financial Freedom

If that’s the case, what is the business that’s losing money? What about your home? Your car?

You might be thinking these aren’t liabilities because you need these things to live. Which is okay, but aren’t they doing nothing but taking from you?

And yes of course the bank says it’s an asset - because it’s their asset! Using the banks definition is detrimental to you because you will buy liabilities and wonder why you can’t get ahead. If you lost your job, how would you cover that liability payment?

So, then what IS an asset?

Let’s look at some examples of Assets VS Liabilities

Real Estate Investing, Asset VS Liability, Bitcoin, Alternate Investments

Are you looking at your portfolio in the stock market or mutual funds and saying “but I am up, I’ve made money!” Well, have you actually? In order to gain or lose money, you would have to sell, right? Until then, it’s just on paper.

You might be a little shocked to find out that many of the things you thought were an asset, were actually a liability. The good news is there are alternate investments out there that you can use to pay for those liabilities you need.

Contact a Financial Coach today, who is an expert in how to identify the best alternate investments to generate passive income, and you won’t be treading that water anymore - you’ll be well on your way to financial freedom.

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