What you think might be an asset to you, could actually be a liability.
Let's start by defining those two terms:
Asset -
- property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
Liability -
- a thing for which someone is responsible, especially a debt or financial obligation.
"In its simplest form, your balance sheet can be divided into two categories: assets and liabilities. Assets are the items your company owns that can provide future economic benefit. Liabilities are what you owe other parties. In short, assets put money in your pocket, and liabilities take money out!"
That new car itself may be an asset, but the loan against it is a liability. To top it off, that car may lose value over time, especially in the form of repairs. This is called depreciation. So is that really an asset? Yes, it is. It may still be worth of something of value to you or someone.
Even cold hard cash is subjected to this. Think about it - $5 dollars doesn't have the purchasing power that it did even 10 years ago. This is due to inflation.
This is where investments come into the picture.
Investment -
- the action or process of investing money for profit or material result.
If you're not doing something with your money, the entities you owe probably will.
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