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Millions of people do not understand what the difference is between an asset and a liability today i’m going to go ahead and share with you guys what examples are in your life of assets and liabilities i can’t wait to share this with you guys today good day subscribers thank you so much for joining me today on the financial education channel so today we’re gonna
Talk some assets and liabilities and i’m gonna go ahead and share with you guys what examples are in your own life of assets and what are liabilities so let’s go ahead and get into this so i got a little illustration over here and on this side we got the exit side we got the vs. and then we got the liabilities on this side now as i go over this list you’re gonna
See a few things that are going to be on the asset side and the liability side and i’m gonna go ahead and explain why they’re on each side so let’s start off with number 1 we got on the asset side home but we also have on the liability side home how could a home be an asset and a liability the reason i put it as an asset and a liability is because that’s truly
What it is it’s an investment but it’s an investment you have to time properly if you bought a home in 2007 2006 2005 you’re probably still underwater in that home or or barely break even maybe a decade later whereas if you bought a home and say 2009 2010 2011 you’re up way huge on that because home prices have gone up substantially since that time especially in
A lot of the western states like arizona and nevada some of those states so that is why a home is an asset yes you pay a mortgage on it and whatnot and that’s no fun but it is truly yours after 30 years and that’s why it’s also a liability because you can buy that in just an investment but that investment can surely go down was once thought that homes could only
Go up and boy was that proven wrong about ten years ago or eight years ago however long it’s been since that happened number two on the asset side a business or a job this is really truly your biggest asset because this is what makes cash flow come to you this is what makes the rest of the everything work unless you inherit it a bunch of money from your parents or
Grandparents or something you need this line to work to make the entire thing go and there’s no liabilities if there’s no business or job so the business is what creates a cash flow or your jobs what creates a cash flow and that’s how you can roll that into more assets or unfortunately roll it into more liabilities on this side i have an apartment now an apartment
Is just a true liability there’s no asset part like at least a home you have a very good chance of that actually being an asset the apartment it’s strictly liability because you’re just paying rent and you have no one ownership in that you’re never gonna be able to sell it for any money so an apartment that’s just a liability number three cash is on that asset
Side in cash is on the liabilities how is that possible how can cash be a liability what everyday you have cash in your pocket that cash becomes worth a little bit less a very very tiny amount but it becomes less a pound of chopped meat ten years ago was a lot cheaper than a pound of chopped meat is now a gallon of gas 20 years ago was a lot cheaper than a gallon
Of gas now a house 20 years ago was a lot cheaper than a house is now so cash every day you have that it becomes worth a little less so that’s why i put it under the liabilities as wills under the assets because obviously cash is nice to have and it is an asset because you can turn it into other assets or you can turn into liabilities so cash really deserves to
Be on both sides the same way home does and i wanted to explain that to you guys why cash could be a liability next over here on this side we have cd accounts savings accounts those are two assets now they will only get you small abouts of interest on them very small amounts of interest but that’s better than cash because they’re guaranteed and you’ll be able to
Keep up with inflation at least if you’re keeping just cash you know like i said it’s becoming a little less all-time cd account savings accounts it’s guaranteed money and you’ll be able to keep up for the inflation while we’re here i got a cell phone cell phone is a huge liability because you know millions of us every year or every other year we go by a new 700
Or $800 smartphone two years later we go to trade it in and we get maybe 150 maybe 200 dollars for that and we have to pay all that money the cell phone company in the mean time so with something that depreciated by 70 80 percent in its value in two years and we had a massive cell phone bill that we probably pay a thousand dollars plus a year or somewhere around
There depending on how many people you pay for asset insurance insurance is a huge asset it’s also a liability now i’ll explain why i have that one on both sides first off on the liabilities on insurance you have to pay every month so it’s money coming out of your business or out of your job that you’re paying out in the fact is most of us will never use our
Insurance health insurance car insurance home insurance all those types of different insurances we’re probably never gonna get our money truly worth out of those because we’re never gonna probably get in that accident bad enough or have that health you know problem or you know a lot of those things but it’s insurance and it’s an asset and there’s in the fact that
What if something does happen what if your house burns down what if you know you get in that bad car accident you kill somebody what if you get a terminal or maybe not a terminal disease but a major disease or something like that that will wipe out your entire asset base something really goes drastically wrong and you don’t have insurance that way so this entire
Section you’ll eat through everything so that’s why insurance is an asset that’s why insurance is also a liability and i would put it a little bit more as an asset than a liability down here your education slash skills it doesn’t just mean if you have a bachelor’s degree things like that that means that you’re always becoming educated that you’re always learning
New skills on your job if you have a job you’re always searching out you know asking your boss hey teaching me this teach me that’s always educating yourself always getting smarter hopefully watching this video is going to create your little bit better education on assets and liabilities always taking it to the next level and that will always help you down the
Road maybe create more income maybe make better decisions on your assets versus your liabilities education is key and it doesn’t just mean getting a college degree or doesn’t just mean having a 4.0 in high school it means ongoing for life education over here we have a car car the liability as simple as that most you guys probably know that some of you probably
Think it’s an asset because is you know it does have some value when you go ahead and trade it in or when you go in and sell it so it’s somewhat an asset but i don’t even put it under that category because really it’s a liability if you buy a new car or a used car as soon as you take that baby off the lot the price goes down 10 20 % as soon as you take it off
The lot and it just appreciates and appreciates and depreciates maybe not quite as fast as a cellphone for instance but very quickly that car depreciates over time over here last stocks or ownership stocks or ownership that can create more income coming in that you don’t actually have to work for because you can get dividends maybe your own franchises or subway
Franchise or you know whatever kind of franchise you get income coming in for that income single thing with stocks if your dividend paying stocks that are big companies you two three four percent a year on dividend money and you know as long as it’s a stable stock the stock price won’t probably go up a ton but it also won’t go down as long it’s a stable company
So that is definitely an asset that can be on your side and lastly liabilities lack of planning that is the biggest liability of anything lack of planning lack of thinking out situations that could happen in the future lack of planning for your assets lack of planning is by far the worst liability you should always plan out emergency situations you should always
Plan out what type of assets you want to get in the future do you want to start that business do you want to you know put more money in a cd account do you want to get in some stocks do you want to make you know a franchisor what none try to get ownership in a small company those kinds of things always be planning ahead of time so that’s assets versus liabilities
I hope you guys really enjoyed this video today i try to do it a little different than some other assets and liabilities videos i’ve seen from other people in the past so thank you so much for watching subscribers if you haven’t subscribed you may want to we talk tons about financial education type subjects like this personal finance we also talked a decent amount
About the stock market and a little bit about business so i thank you guys and have a great day
Transcribed from video
Assets vs Liabilities By Financial Education
