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Liabilities: what they are

Liabilities: what they are

Written by R. A. Stewart

A liability is when you have a debt to pay. You are responsible for that debt until it is paid. The opposite of a liability is an asset. It is something which provides some kind of value to you.

An example of a liability is when you have borrowed money from a finance company to purchase a car. You pay a certain amount to the finance company each week or fortnightly. It is a liability because it takes money out of your pocket and reduces your wealth.

An example of an asset is an investment with a finance company which lends out money to car buyers. This is an asset because it puts money into your pocket and increases your wealth.

Borrowing money is not the only type of liability which can reduce your wealth.

Others can be, keeping pets, smoking, drug taking, drinking, hobbies, and so forth.

Have you ever heard of dog owners spending thousands of dollars on vet bills when for just $50 they could have had their pet pooch put down. I know of some people who have spent $1,000 on a vet bill for their cat. If that is not financial stupidity I don’t know what is.

Emotional spending is very costly in the long term.

Borrowing for something which does not give you anything in return is a drain on your future financial welfare. Paying for a holiday is a perfect example. This is something you can do without. If you don’t have the money you don’t go on holiday. It’s as simple as that.

Hobbies can be expensive; have you ever seen those news items on television where some collectors have spent thousands of dollars on their items. Whether it is a doll collector, model train collector, or whatever, these people spare no expense in getting their hands on the next item to add to their list.

Becoming an investor rather than a consumer will help you to be better off financially in the long run. By minimizing your consumer purchases and investing that money instead you will build up an investment portfolio, whether that be in the share market, property, and the like. Stuff doesn’t last long and it loses its value over time.

Investing in yourself will pay dividends in the long run if you apply what you have learned. It is just a matter of applying whatever is applicable to your own life. There is a lot of investment advice on the internet and in books but not everything you read will be applicable to your personal circumstances. Having the ability to discern which advice to follow takes experience.

What you spend your money on today will have an effect on your future lifestyle. It is all about making the right choices in life. Politicians talk a lot about achieving different outcomes for certain groups of people. Personally, I think that it is choices which people need to take responsibility for because the only reason why there are so many different outcomes is because people make different choices.

About this article

This article is of the opinion of the writer and may not be applicable to your own personal circumstances therefore, discretion is advised. You may use this article for content for your website, blog, or ebook.

Www.robertastewart.com

 

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7 Things you should never do if in debt

7 Things you should never do if in debt

Written by R. A. Stewart

If you have consumer debt of some kind then there is a responsibility and an expectation that you will honour those debts and pay them off in good faith. It is your responsibility to repay whatever you owe and there is an expectation by the lender that he or she will be repaid the amount they lent plus any interest on the loan.

Taking responsibility for your financial affairs and not just burying your head in the sand when problems arise is a part of being a mature adult. Any money you have left over after paying your fixed costs is called discretionary spending money. Your debts are fixed costs which means they must be paid for. You do not have any discretionary spending money if you have consumer debts.

There are things which you must NEVER do when you have debt of any kind. Here is my list of no nos as for debtors.

  1. Subscribe to Satellite TV

This is something which you should never do when you are in debt. The cause of debt is the inability or unwillingness to live within your means and make sacrifices. Sky TV is something which you can do without.

  1. Go on an overseas holiday

How on earth can a debtor go on an overseas holiday when they have debts to pay? A person with a conscience would not be able to relax and enjoy themselves. 

  1. Spend money at the bookies

When you are in debt any money in your possession does not belong to you, it belongs to your creditors. You should not be gambling if you are in debt. That is irresponsible. The amount of money is inconsequential, even if it is just $5 on a lottery ticket every week. That is $5 that could be used to pay off your debt. 

The lower your debt the less interest you have to pay.

  1. Go out for a meal

This is another big no no for a debtor. Money spent in restaurants is something you do with discretionary spending money and since you are in debt, you do not have any discretionary spending money. If you have a partner who insists on being wined and dined, tell them straight out that you need to pay back your debts before going on nights out. If he or she doesn’t understand that then give him or her their marching orders.

  1. Subscribe to netflix

This is also something you do with your discretionary spending money. Netflix is a drain on your finances and your spare time. You cannot have a debt and Netflix at the same time.

going to the rugby

  1. Buy expensive gifts

It is all very well showering loved ones with expensive gifts for birthdays and Christmas but not Okay if you are in debt. You are the one who is paying for this madness, not your loved ones. 

Buying stuff on credit is only delaying the inevitable; the crunch always comes when you have to pay it all back plus interest. 

This all boils down to prioritizing your spending. If you are in debt then paying your creditors has to take precedence over everything else; that is after your fixed costs have been taken care of.

  1. Buy a new car

This is one of the worst decisions you can make when in debt because if you are already in debt then you have no more to buy a car therefore, the only way that you can acquire one is to borrow more money and this will keep you in poverty. I suspect that none of my readers will be stupid enough to make this mistake because people who are financially literate read articles which increase their financial education.

About this article: The information in this article is of the opinion of the writer and may not be applicable to your personal circumstances therefore discretion is advised. Feel free to share this article. You may use this article as content for your ebook or blog/site.

Www.robertastewart.com

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KEEPING UP WITH THE JONES

The cost of keeping up with the Joneses.

Keeping up with the Joneses cost cost you dearly and determine how you spend your retirement years. Life seems to be a competition to at least have a car or house which not only serves the person for which it was made for but makes a statement which says, I am at least the equal of the Jones’s.

So who are the Jones’s?

They are other people who have that fancy car, that nice house, that nice swimming pool, or that nice whatever that is the envy of others. 

The bible says “Do not covet another man’s wife or belongings,” which is saying we should not envy another person’s lifestyle and I will tell you why.

Firstly, you do not know how hard they have worked for whatever they have or what kind of sacrifices they have made.

Secondly, for all you know, they may be up to their eyeballs in debt trying to compete with everyone else in the material rat race.

Thirdly, their income may be twice as much as yours. There is an old cliche which says, “Living a champagne lifestyle on a lemonade budget.”

Your spending and savings plan must be a reflection of your income level and that means to forget what others are spending their money on and focus on your own situation.

There are certain spending habits which will cost you thousands in the long run and they are;

1. BUYING ON HP

The interest payments on consumables bought on HP (Hire Purchase) will add up to a fortune during your lifetime. Interest is dead money; in other words, it is money you pay but do not receive anything for it.

2. CREDIT CARD USE

Interest rates on credit cards can be horrendous if you get behind on your payments. As with HP, interest is what you pay for the use of other people’s money. Greed and selfishness manifests itself in widespread credit card use.

3. BUYING STUFF BRAND NEW

A lot of consumer goods are bought brand new when you can purchase the same item second hand at a fraction of the price at a charity/second hand shop. The eco centre at your local tip also has low cost goods for sale at a very low price. 

Many people are too proud to even set foot in these places because it is not in keeping with the image which they are trying to portray.

Trying to maintain an image during your lifetime will cost you dearly in the long term. 

www.robertastewart.com