HOW TO KNOW THE DIFFERENCE BETWEEN YOUR ASSETS AND YOUR LIABILITIES

ASSETS AND LIABILITIES

To master your finances, you must know the difference between an asset and a liability. Most people spend time investing in liabilities which to them, they think are assets. Your ability to distinguish between these two generates a long lasting control over your finances. Get the difference now and invest in assets. What are assets and liabilities? In simple accounting terms, an asset represents things of value and benefits in the long run whilst liabilities include things which represents lost and depreciation in the long run. Even knowing the trend of events can help you distinguish between these two.  Most people are immersed in abject poverty because they lack the knowledge between an asset and a liability. Rich people recognize assets and acquire them whilst the middle class and the poor keep acquiring liabilities. They usually think they are acquiring assets. If you can comprehend this simplicity of an asset and a liability, your life will have a plan and be financially easy. In a quest to figure out the difference between an asset and a liability, let me inform you about what I call, the Time Factor Principle (TFP).

TURN YOUR ASSETS TO LIABILITIES

 The time factor plays a role to realizing the difference. What you need to understand is, time has always been an asset but most people turn it into a liability. This singular act affects their finances in the longer term. A deep thought about this, will enable you know the difference between a liability and an asset. Although most people may argue they know the difference between these two, which is an asset and a liabilities; I can confidently state that, the difference is not in what you were taught in the classroom. Forget about the classroom lessons. Think deep down within yourself and as an individual. The simplicity of the difference escapes most adults because, they have been educated differently and mostly by other educated professionals such as accountants, real estate agents, financial planners and so many bookworm professors. This is where the problem geminates from. Think about this, your accounting teacher or lecturer told you an asset is bla bla blah and a liability is bla bla blah. To your accounting lecturer, the things he or she mentioned to you as an asset or a liability are the things generally accepted as definitions. Also, they are things they themselves considered to be either an asset or a liability, which is highly dependent on how they have gained or lost from those they considered as such. 

DEVELOP YOUR LIABILITIES TO USEFUL ASSETS

With this, I can strongly argue your accounting lecturer to be basing these lessons on his or her personal experiences. To them, it is an asset or a liability. This is your accounting lecturer’s opinion and point of view as to what really an asset or a liability is. Yet you put it at the back of your mind. You grew up and started buying liabilities thinking you are actually investing in assets. In the long run, it backfires and brings you back to square one. What about your own view on assets and liabilities in accounting? Remember the time factor I stated earlier. The general acceptability of an asset or a liability was a theory stipulated so many years ago. For theories to have an impact on our lives in the real world, they need to be updated on daily basis. I can state for a fact that, the accounting theories we learnt in school was equally taught our grandparents as well. These principles helped them in a way. In their time, what they considered to be an asset really generated a return but what about our modern day generation?  We are still being taught these old principles in school. We finish school with so many chaffs in our minds as theories which cannot even be applied to the real world to get results. The Time Factor helps in knowing the difference between an asset and a liability. With this principle, you can relate well with assets rather than liabilities.

USEFUL ASSETS

To know what defines an asset, it is not words but numbers. It also has to do with not just the numbers but what the numbers are telling you. For instance, it is just like words. It is actually not the words you are speaking but rather the story you are telling with the words which brings understanding. You need an in-depth comprehension. Many people know the numbers but they do not understand the numbers. Comprehension leads to application and eventually results.  You can get an A for reading but F for comprehension. This is because reading the words or seeing the numbers is just 20% of the work done. The rest 80% accrues from understanding and an effective application of what you understood to the real world in order to get results. If you cannot differentiate between the numbers, I bet you cannot tell an asset in your entire life.

EARN A LOT FROM YOUR  ASSETS

In conclusion, I would like you to Figure out what an asset or a liability is to you as an individual. I cannot give you what an asset or a liability is. What I might consider to be an asset may not be an asset to you. It varies from person to person and changes with time. I believe with the little knowledge you have accumulated in distinguishing an asset from a liability using the time factor, you will start investing in assets and not liabilities.

 Try to acquire assets and grow them to mature into huge finances.

All the best.