Assets and liabilities…do you know the difference between these?

Assets and liabilities are terms we’ve probably encountered a number of times in our lives. But do we know what these terms actually mean? Let’s find out…

The Cambridge English dictionary defines an asset as something that is owned by a person, company, or an organization such as money, property or land. But my experience tells me that an asset is something you own that puts money into your pocket. For example a rental car, real estate among others…even a loan that gives you positive cash flow monthly as you service it is an asset!

Meanwhile a liability I would simply say is something that takes money away from you such as bad loans among others. Another perfect example of a liability disguised as an asset is a car that you own and keep spending on through servicing and gas but never gives you any positive cash flow. After all, you’d sell it at a net loss after it’s value is corrected for depreciation and expenses.

I’d rather suggest we view assets and liabilities in terms of cash flow instead of the traditional understanding which is quite misleading. Get to know what a real asset is and build wealth basing on that.

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Thank you for reading 😊