Wealthy people make different choices with their money than the rest. “The first requirement of building wealth is to know the difference between assets and liabilities. Assets put money into your wallet, preferably each month. They will "feed" you, even if you are not working. But liabilities take money out of your wallet, usually monthly. They will "eat away" at your income, even if you are working,” said Dr. Stanley Riggs, who built successful careers in the residential, commercial, industrial and resort asset classes by staying ahead of economic trends.
Članek je na voljo tudi v slovenščini TUKAJ.
Everyone has expenses. What characterizes a lower income household is that almost all of their earned income flows into expenses. They struggle to maintain a roof over their heads, food on the table, and a car in the driveway. They have just a little money to put into their liabilities – an emergency fund and when it comes to an unpredictable situation … they struggle in different ways.
Credit cards, loans, even mortgages
The most common liabilities, beside regular costs, are credit cards with outstanding balances, consumer loans, and also home mortgages. Your home mortgage is actually a liability to you and an asset to the mortgage holder, since it takes money out of your wallet and puts it into the bank's pocket every 30 days for several years. If you were to lose your job, your mortgage would be the one liability that would eat your savings fast.
In order to create a safer financial future, it is important to empower your emergency fund, when you have a regular income. If you have the possibility to put more money in your emergency fund, do it whenever you can. You never know what the future will hold.
It is better to be prepared. If your car breaks down or you need a new washing machine, your emergency fund should be able to cover those expenses. If not, you will be, once again pushed into situation to grow your liabilities by taking on more credit.
So, do you know what your liabilities are?