Liabilities to Assets: Turning Your Liabilities into Assets is Key to Better Cash Flow Management

Asset vs liability: Are you buying an asset or a liability?

Understanding the difference between an asset and a liability is an important ingredient to improve your cash flow and achieve financial health.

In this article, the definition of asset and liability is non- conventional, not the usual concept used in financial statements.

Asset puts money into your pocket

Liability takes money out of your pocket

This definition is popularized by renowned personal finance authors including Robert Kiyosaki.

Thus, a physical asset can possibly be a liability when it financially drains you. Here are examples:

A cellular phone is an asset if used in your business operation which puts money into your pocket. It is a liability if you consume on loads used solely for gimmicks which merely take money out of your pocket.

A car can be an asset if likewise used for a business. While you are spending money for gasoline and fuel, the expense is necessary for your business operation. On the other hand, it is a liability if merely used for household errands where it would be cheaper to use a public utility.

A home can also be an asset or a liability. On a personal and psychological level, it is an asset because it provides family comfort. It becomes a liability when it requires high maintenance costs. It part of it is rented out it can become an asset.

Appliances can also be evaluated in using asset vs liability perspective.

Don't  buy properties and gadgets  which in reality are liabilities and causing you more money problems.

Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.

Evaluate any planned purchase our concept of  asset and liabilities. Does it puts money into your pocket? Or will it add up to your maintenance costs?

For example, home ownership is more of a liability rather than an asset. Home repairs and improvement is a never ending “pastime”. Consider acquiring a modest home which will not drain your pocket.

Converting your liabilities to assets  is a key ingredient to proper money management. 

Consider investing in real assets such as stocks, bonds, mutual funds and rental properties. Investing on a business website is another vehicle to grow your money in the long term.