Picture this – taking a loan just to buy a yacht to gift your wife and make her happy, while you sleep restlessly on repayments of yet another loan. Do you think this is happiness? Is that yacht an asset for you?
Piling on liabilities on yourself is an added stress and not an asset. Still, you create more liabilities unreasonably rather than investing in assets. Why? Maybe, your inability to differentiate between liabilities and assets keeps you away from gaining wealth. Those who excel in this art carry the tag of being wealthy, those who don’t struggle with them as liabilities.
Following facts will give you a gist of things that will help you understand why investing money in liabilities isn’t wise and how to differentiate between each of it.
An Insight – Liabilities and assets
Let’s take up a simple example of a house you’ve purchased and stocks you’ve invested in enact as assets and liabilities.
If you have bought a flat as an investment and just kept it just like that, do you think this is your asset? Think again! Anything that demands maintenance and cash outflow is a liability. You might have given a lot of thought for this and invested a lot of money, but it is a sitting duck and not giving any returns.
But, if you had put it on rent and the rentals were coming from that property, it becomes an asset as there is a cash inflow from a source you’ve invested.
Another example of assets is the investments done in stocks. The stock market fluctuates according to market trends. If the market shows positive results, it will reap monetary benefits to you and build your assets in no time. But, it can also act in reverse direction, which can be termed as liabilities.
Hence, it is you who needs to have an eye on your actions to stop piling upon liabilities.
Being observant is wise
There are times when you miss on a lucrative asset building opportunity just because you lost an important link associated with it; or probably you weren’t as observant as you should have been. For example, losing your old business partners or for that matter, even employees sometimes, act as liabilities and all the wise people who are wealthy don’t work on such principals and thus, stay away from being liable for anything that can minimize their money.
Hence, every opportunity coming your way might not be an asset and vice-a-versa. The only trick to keeping up your spirits high and play safe is to stay focused and let your materialistic desires rest aside to enjoy your wealth pot to the brim always.
Pile up assets, not liabilities
Free yourself from debts that have been going on for a long period. Doing so, will not only free your mind from it completely, you will be able to focus on other financial aspects related to asset building in a better manner.
The rich and the wealthy never plan their wealth maximization by single cash inflows, and debts don’t have any space in their money making strategies. Instead, they make investments at places that can generate positive and 100% cash inflows. So, start building your assets today with a clear vision and a rational mind to enjoy strong financial holdings in future.