Whatever your financial situation is, having the knowledge to recognize the difference between assets and liabilities plays a crucial part for creating wealth in your journey to financial freedom. It’s a basic understanding that you need to have for dealing with your finances. Without it you just end up spending your money haphazardly.

Spending your money to buy liabilities can have long term negative effects on your financial well-being versus spending your money to buy assets. An asset, whether you purchase or create it, is not only about how you invest your money, but how you invest your time is also an asset. You don’t…..and you won’t get wealthy working for someone else! You get wealthy in your free time by generating or acquiring assets.

“To get rich, you have to be making money while you’re asleep.” – David Bailey

Working for someone else is a foundation which you can use to create and build your wealth on, but it’s not where your financial freedom will come from. Aside from purchasing and/or creating assets, knowing what is a financial liability is equally as important. Just like ignorance of the law is no excuse for breaking the law. The excuse of ignorance for not knowing what a financial liability is won’t save you from financial ruin.

Assets and liabilities are opposing forces in finance and the difference in how you see them will make you or break you financially. Don’t let thoughtless spending keep you from reaching the financial freedom you deserve. Learn to recognize and understand the difference between an asset and a liability, and take control of your life!

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