What is the difference: Assets & Liabilities

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. 

What is a Loan?

partial view of businessman pointing with pen at loan agreement

What is a Loan?

A loan refers to a type of credit. With a loan, a specific amount of money is lent to another individual or entity in exchange for future repayment for the value of the principal amount usually with interest.
Lenders of loans are usually institutions such as banks or credit unions. The lender advances a sum of money to the borrower who agrees to repay the borrowed amount on specified terms. There are different types of loans available, including secured, unsecured, personal, and commercial loans.
A mortgage loan or a car loan are examples of secured loans. A secured loan is a loan that is backed by or secured by collateral. An example of an unsecured loan is a credit card. This simply means that the borrowed money is not backed by any collateral.

Investopedia provides more information regarding loans at:   https://www.investopedia.com/terms/l/loan.asp

Types of loans:

  1. Secured Loan
  2. Unsecured Loan

 

Secured Loan:

A mortgage loan or a car loan are examples of secured loans. A secured loan is a loan that is backed by or secured by collateral. In these scenarios, the collateral becomes the asset for which the loan is secured, that is, the home or the car. Other forms of collateral may be required by the lender before coming to a final agreement with the borrower.

Unsecured Loan:

An example of an unsecured loan is a credit card. This simply means that the borrowed money is not backed by any collateral. With unsecured loans, lenders typically charge a higher interest rate than secured loans, because the risk of default (Borrower not repaying) is higher than with secured loans. With unsecured loans, rates can fluctuate based on key factors including a borrower’s credit score.

Being able to access the loan you need when you need it has never been easier than via https://www.thefinroute.com/. Browse your options, speak with representatives and get the loan that suits your needs best.

Loans and debt have their function in the bigger picture of access to money and should be taken with a high level of responsibility and understanding of the terms of the agreement needed to access your loan. To read more on Loans you can visit https://www.nerdwallet.com/article/loans/personal-loans/what-is-a-loan.

What is Money?

money

What is Money?

The main function of money is as a medium of exchange for goods and services. Money allows people to get the things they need and desire to live. It is an economic unit of measurement, used for transactions within an economy.

The main functions of money include, it is a unit of measurement/ account, it is a store of value and it allows for deferred payments. There are 2 main types of money we use today: Fiat Money and Cryptocurrency.

cryptocurrency and money

Some functions of Money:

  • A Unit of Measurement/Account – Money can be used to track the value of units gained or lost across multiple transactions or exchanges of goods and services.
  • Store of Value – Transactions with money are usually based on future intent. Thus, money provides a way to store and retain current value today for future use in transactions tomorrow.
  • Allows for Deferred Payment – Being able to store value, money can now be used to transfer that value through time via the tools of credit and debt. A quantity of money can be loaned from one person to another and an agreed-upon value (quantity) can be repaid across a period of time.

 

For more information on money and its many functions, see https://www.investopedia.com/insights/what-is-money/