Hello, everyone and welcome back to a new video. Now I want to talk about something today that is so important when it comes to your personal finances, and so many people get this wrong. Okay, what exactly is a liability and what exactly is an asset, so we're gon na be talking about today and is the reason why 44 % of Americans cannot afford the assets they have now before we begin. I do want to let you know that I do residential mortgages in the state of Arizona if you're sitting there like why you telling us this.

Who really cares so as part of my job as a loan officer is to take an in-depth look at a particular person's personal finances? You know to see if they qualify for a home loan, so on a daily basis. I get to see how much someone makes and ultimately how much someone spends a month in their expenses when it comes down to credit cards, a car payment student loans, those sorts of things, and then my job is to move some numbers around and maybe advise some Lifestyle changes, so people can afford the home of their dreams. This, in turn, has made me very aware of a common problem. I see every single day in regards to assets and liabilities, so, let's simply break down assets and liabilities.

An asset is a resource with economic value that will provide a future benefit. Assets are bought or created to provide value. Now, a liability, on the other hand, is an individual's legal financial debts or obligations that arise over time. Let me break this down.

In the simplest terms, possible, an asset puts money into your pocket, and a liability takes money out of your pocket. Here's why this is so important, and so many people get this wrong. People think a home is an asset which it can be if you are making money from it. Let's say by renting it out, but if you are living in that home it is not considered an asset because you are paying for so.

Essentially it's considered a liability. Even if it's paid off because you're paying your taxes, your insurance, your homeowners association, anything else, you have the maintenance on it. Everything else involves the home is making it a liability and taking money out of your pocket so bottom line. It be a liability.

If you lived in that home again, it's an asset, if you are making money from that home and I'm not sure why this topic has been beating around the bush so much in our schooling system and I'm not just talking at a high school level. I'm talking at a collegiate college level here I got my bachelor's in both management and marketing, so I've seen a plethora of business classes and this topic is never discussed properly and people dream of getting an undergrad degree. I didn't understand this topic until after college. Everything you learn in college is about this super rigid and meticulous style, to a balance sheet and income statement, and all this other stuff morality.

If they could have just said, hey a liability takes money out of your pocket and an asset puts money into it. I'd be so much better off and I need to put a warning out there before some people lose their mind. This is the simplest terms possible when it comes to an asset and a liability. They can be broken down so much further, and another thing I need to say is that an asset isn't always an asset and a liability isn't always a liability people think all houses are assets which we just talked about is not always the case.

One man's asset can be another person's liability. One of my favorite examples is that boats or other recreational vehicles are always a liability, because we all know what boat stands for right bust out. Another thousand because they're so expensive to use and maintain and overall just keep them going. But it depends on how you use that boat, which determines whether it's an asset or a liability.

For example, when I was 21, I bought my first wakeboarding boat for a good chunk of change, put a little bit more money into it. But then three months later turned around and sold it for double of what I bought it. For so is that an asset or a liability asset? It was putting money into my pocket, so I would treat that as an asset. Another example is one of my cars.

Everyone thinks cars are liabilities. Well, I rent out one of my cars on true calm, which is essentially an Airbnb for cars, so people get to come and rent my car and I make some money from it. So, yes, I do have to maintain it. Keep it up to date, wash it clean all those sorts of things which makes a liability about the end of the month.

I'm going positive on all that, so essentially I'm treating it as an asset. It's is making me money. So the best way to think of this is, if I were to stop working today, how much money would be coming into my pocket from all my assets and how much money would be leaving my pocket from all of my liabilities food-for-thought. Ladies and gentlemen, but again I'm a mortgage guy in Arizona.

So if you ever want to sit down and discuss what's in the cards for you, let me know at lending shawn Malka com, but hopefully you learned something useful in this video. If you're around here consider smashing that subscribe button, maybe even hitting that like button, I would greatly greatly appreciate it, but until next time I will see you in the next beneficial video.