Pen with balance sheet. Suitable for accounting and finance concept

What is the difference between assets and liabilities?

Our assets are the items we hold that improve our economic advantage in the future by adding value to us. Our liabilities, on the other hand, are the items we possess that deduct value from us in order for us to keep them.

Assets

Assets include the following:

  • Cash
  • Investments
  • Insurance on Cash Investments (Savings)

  • Vehicles (For Business)

  • Real Estate (Making Money, example: Rent)

When you’re analyzing your assets, one thing to keep in mind is how liquid they are. The ease with which an asset (Investments) may be turned into cash when needed is referred to as liquidity. In the opposite situation, an asset is described as illiquid if it is difficult to convert it to cash in less than a year. For example, Real Estate may take longer to convert to cash than selling a vehicle.

For more information you can visit: https://www.investopedia.com/ask/answers/12/what-is-an-asset.asp  

Liabilities

Examples of liabilities:

  • Loan Debt
  • Mortgage Debt
  • Taxes

Your liabilities tend to be in two forms, your short-term and long-term liabilities. Short-term liabilities tend to be paid off inside of a year, such as a small loan. Your long-term liabilities will take a year or more to be settled and paid off. To understand in more detail, visit: https://www.investopedia.com/terms/l/liability.asp 

Being financially responsible entails having a firm understanding of your assets and your liabilities. This enables you to make more informed financial decisions. You can utilize all of our financial tools at The FinRoute to better understand how you manage your assets and obligations. 

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