Friday, January 28, 2011

Defining Assets and Liabilities

Define assets?

In Webster dictionary definition, an asset is a useful or valuable quality or anything of material value or usefulness that is owned by a person or company.

Such as?
What you own: House, vacant lot, house and lot, buildings, cash, automobiles, computers, office equipments

Define liabilities?



In Webster dictionary definition, a liability is anything that is owed to someone else.

Such as?
What you owe: bills, credit card debt, taxes, loans

This is my question...
Do you think your assets are really an asset? Why?

My simple definition of Assets and Liabilities.

Assets put money in your pocket and liabilities take out money from your pocket.

For instance, you called your house an asset? Does your house put money in your pocket? I bet it takes out money from your pocket. Why? Because of maintenance like house repairs, real state taxes, fixing toilets, and other activities that require you to shell out an amount to sustain your house in good shape.

My answer, your house is a liability!
Very interesting?!
Just like the other assets I mentioned, cars, computers, equipments, etc. Those are all liabilities because you spend money to maintain them!

Few reasons?
You pay for car maintenance, for check up, car insurance, gas, and other necessities to keep it running and in good condition.
Your computers, you buy computer peripherals, you upgrade them, you buy softwares!

Am I right?
Now...
How can you make your asset an asset?! How can you make cash out of your assets?

Here are my few examples.

  • House or space you live in
          If you are comfortable having a bed spacers, then post "need bed spacer". If you still have room, you can have room for rent. Or you can divide a partition for a space to rent. Or if you have a small apartment, get a friend who is looking for a place to live then that friend can share the blessing to you.
         If your house is a building, let's say 4 or 5 floors. The rooftop can be rented for billboard advertisements just like what we are seeing along the roadways. Or it can be rented from a cellular network. For example, the rooftop of my friend's building is rented by a cellular network and she is receiving a monthly income from the Network Company. It is a commercial business and I bet the pay is huge.
          If you have a vacant lot and it's near a commercial area, use it for parking space. You will receive pay from parking fees. Or have it leased for long term or short term depending on the needs. For example, recently, the Maynilad and its contractors needed a space to place their equipments because they are having major changes on the water pipes and pipelines. The owner has the vacant lot rented as equipment storage and barracks for the workers.
  • Automobiles, like sedan, van, truck
          Your car can also generate income by having it on loan. You can privately rent to friends and co-workers for weekends especially for hanging outs or out of town vacation.
          Or if you have a budget, you can get a franchise for taxi or shuttle service.
          Or, delivery vehicle for goods for your truck or truck for rent.
  • Computers and other office equipments like fax, printer, and scanner
          Before, when I still don't have my office resources, I always go out to complete what I needed to accomplish - those are student days.
          When I needed to fax a document, I go to a shop and I pay 15 pesos for the fax fee.
          If I needed to print a thesis or other school related documents, I go to a computer shop to have it printed and I pay 5 pesos per page.
          Same goes with the need to surf the web, scan images to upload to a site, and some other activities that require me to rent office resources.
          Now that I have my office resources, I used it to earn an income. The first time PLDT offerred a promo of 1 unit of PC with internet connection and tech support services package, I grabbed it for only 35, 000 pesos (this was 3 or 4 years ago). Together with this promo, I incorporated some of the office resources I have like the scanner, the printers, the fax machine... all usage for a fee. I even took a typing service job as an extra. It's minimal but at least it has returns.


From my few examples, your properties can now make money for you. Don't just dwell on this, there are limitless opportunities for income streams. We should be thankful that we are humans because humans are blessed with the opportunity to discover.

My advice: Put your assets to work.

Remember:
Assets put money in your pocket.
Liabilities take out your finances.



4 comments:

  1. This is nice. I learned something new here. Something not mentioned in schools that is.
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  2. Really interesting article.. Exactly what I was looking for.. With all the necessary info..
    Keep it up!

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  3. Thank you all folks for all your wonderful comments! Am back from being inactive for almost 4 years! More posts to come :)

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