Personal Finance Challenge #16: Know Your Assets & Liabilities

Time may be your greatest asset, but you probably have way more assets then you realize.

If you are reading this right now you have access to one of the greatest assets of the 21st century. The internet.

The vast amount of information you have access to is mind boggling. Unfortunately there is just as much bad information out there as good. And by bad I mean anything from completely wrong to potentially counter-productive and damaging.

Luckily you can develop another asset you have. Your critical thinking ability. And you can get better at sifting through all the good and bad information out there.

What does this have to do with personal finance? A lot more than you would realize at first glance.

Normal assets in personal finance are defined as anything you own that can produce money. Rental property, stocks, bonds, precious metals, cash in the bank, antiques, wors of art, baseball cards, etc. Anything that can be sold for a profit or earns you money in appreciation or cash flows.

If we are really strict about things, anything that can be sold for a profit is still a liability until it is sold.

So very few physical things are assets and most are liabilities. Your house, your car, your bike, your gym membership, your magazine subscription, anything that requires maintenance or costs you money every month is a liability. Even your dog is a liability in the personal finance sense of the word.

But your dog can be both a liability and an asset. While it may cost you a certain amount per month to have a dog, your dog is also an asset because it produces some things money can’t really buy so well. Things like companionship and true joy. Perhaps just a listening ear that won’t judge you? These types of things are pretty much priceless.

Our education and experience are some of our greatest assets too. They help us to earn a good income so we can build up more assets.

Friends and loved ones too. They are certainly some of the greatest assets of all.

And let’s not forget health. For without health, wealth doesn’t hold much value. If our health assets are low, then we will not be able to enjoy our financial assets as much as we like.

Make a list. Write them down. Think of as many as you. All the assets and liabilities in your life.

Then ask these questions…

What assets would you like to add to the list?

What liabilities might you like to be rid of?

These lists will help you to carve a solid path toward personal finance mastery. They will help bring your internal motivations to the forefront. With those things that drive you to success so clear in your mind, their will be nothing to stop you from reaching your goals.

This is our 16th challenge in The Personal Finance Challenge Series…