The Difference Between an Asset and a Liability
In order to be more successful, it is important to understand and apply the distinction between assets and liabilities.
The concepts of asset and liability apply in many situations.
- Some properties are assets and others are liabilities.
- Some people can be assets; others are liabilities.
- Some habits are assets and others are liabilities.
Property: An Asset or a Liability
A piece of property is an asset only if it generates a net income and / or gains value over time.
For example: If a landlord owns a house and he lets it out in exchange for rent, then the house is an asset to the landlord, because it generates an income. And the house itself gains value over time.
But, if the same landlord owns a car, then the car is a liability, because the car costs money to keep on the road, and it is decreasing in value every month.
- Cars tend to lose value over time, and cost money every month to run, so they are a liability.
- Rental houses tend to gain value over time, and earn money every month so they are an asset.
If you are thinking about financial matters, the goal in life is to minimise your liabilities and maximise your assets.
Now let us apply that to other areas of life.
Minimise liabilities and maximise assets.
Some people are assets; others are liabilities.
- Some people tend to add value to your day. They make life easier, better and more productive.
- Other people detract value from your day: they make your life, harder, worse and less productive.
Some people give more than they take. These people are assets.
Other people take more than they give. These are liabilities.
Do you have anyone in your life who takes a lot, but does not give much in return?
If yes, ask yourself, is this person more of a liability than an asset?
You and your life systems cannot afford to carry too many liabilities.
Some of your habits are assets and others are liabilities.
We are all creatures of habit.
- Some habits make us better. They are assets.
- Other habits are liabilities. They make us worse.
Do you have any habits that are a liability to you?
Seek-out and destroy any bad habits that might make you a liability to yourself or others.
Destroy any elements of laziness, neglect or spite that might be lurking in the shadowy corners of your character.
Maximise any habits that are an asset to you.
Do you have any virtuous habits that make you a real asset to others? Are you hardworking, honest and cooperative? Let the rest of the world feel the benefits of your assets.
Maximise your assets.
Minimise your liabilities.
Quiz: How Good Are Your Work Habits
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Asset
In personal finance and self-development, an asset is a resource that puts money or other clear gain into your pocket, rises or at least holds its value, costs less to keep than it pays back, and strengthens your financial or personal position.
CG4D Definition
Context: Personal finance and self-development
Genus: Resource
- Provides a net cash flow or direct useful gain
- Gains or keeps market value over time
- Ongoing costs stay below the returns it gives
- Improves the owner’s financial or personal strength
Article Summary
An asset pays you; a liability drains you. Apply this simple rule to your money, your friends and your daily habits, then keep what adds value and drop what costs you.