Saturday, December 22, 2012

Financial Food for Thought (Assets & Liabilities)

  An Asset is an item of value owned by an individual or corporation, especially something that has the potential to make a profit while you own it or when you sell it. An asset can be real estate property, a business, or securities such as stocks and bonds, etc.
 A Liability is a debt, financial obligation, or item that loses value or creates an expense while owned, and often a loss is made when its sold. Liabilities can be credit card balances, lines of credit, car loans or other loans, payment plans for purchased items, etc
   If you truly want to become financially free or rich, you have to buy more assets than liabilities. You want your personal balance sheet to look like this:
            Personal balance sheet
              Assets                       Liabilities
              Stocks          Loans on which interest has to be paid
         Mutual funds                 Car loan   
            Business                Credit card debt
           Gold & silver
  Money market account
  You can become financially free or even rich with a balance sheet like this because your income is greater then your output (expenses). Building a personal balance sheet like this won't happen over night. But with patience, self-discipline, and a plan, someday you can have a balance sheet that looks just like this or even better!!

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