Becoming Rich: New Look Into Assets vs Liabilities - Part 2

Balance

In part 1, we discussed the basis of assets vs liabilities. Here we go deeper, things are not black and white. The same asset for one person can be considered a liability for another, depending on how it is being used.

The same car can be bought by two neighbours, whilst  makes use of it most days and keeps up its maintenance and costs with fuel and other services.
Whilst another has way less use and the car is less wore down and less additional costs.

Some would argue person A have makes the car value lower by higher mileage and wearing it down plus the additional costs, but the fact that person A uses it and gets a lot of practical value out of it is key! How much time and money is this use of the car saving compared to other options? How 

What is the true value being given?
The pratical value of things has to be taken into account and if you can create an asset out of a liability, making it work and benefit you.

If you buy shoes that someone would consider expensive, but you wear them twice a week and would last you 3 years. That is roughly 100 times per year and over 3 years 300 usage times. So they cost £60, which means they cost £0.20 per use. Rather than something you could have bought for £20 but would have lasted 6 times less, so rather than 3 years, only 6 months, so that is 50 total uses (twice a week), which means those shoes cost £1.20 per use! So sometimes trying to save you spend more. Read more here: "the true cost of things".

So for your assets and liabilities, what is the benefits its bringing you? Per use per week/month, per time saved?

• A loan can be used smartly to create a business well-planned to make a significant return. 
• A credit card can be used responbility to increase your credit rating and give you benefits such as cash backs.
• A service you pay for will reduce the cost in money and time you'd have to pay later on if you didn't have it in the first place. Insurance, gym, transportation methods, etc.

The question to ask, are you better off with or without?

Now this can also heppen the other way round, where an asset creates other liabilities.

• A house might have a high mortgage and high interests and the total paid towards it could be less than what it would be to sell it, from devaluation or high-interest rates.
• What you consider a well paying job consumes your time, which stops you from further development. Or you get a false sense of security and increase your expenses making you tied up.
• A car that you do not use often enough and could use a cheaper one to do the same job
• Poor perfoming investments, which are liquidated at points of loss.
• Rent might allow you flexibility of

  do the  table for all assets and liabilities and show and they can be used the other way round.  example renting: 

  There are several benefits to renting a property rather than owning one:

  1. Flexibility: Renting allows for more flexibility in terms of length of stay and location. This can be especially beneficial for those who may need to move frequently, such as for work or other reasons.

  2. Affordability: Renting can be more affordable than buying, especially for those who are just starting out, or those who have limited financial resources.

  3. No maintenance costs: As a tenant, you are not responsible for the maintenance and repairs of the property, which can be a significant cost savings.

  4. No long-term commitment: Renting allows the tenant to move out at the end of the lease, which can be beneficial for those who are not ready for a long-term commitment.

  5. Tax Benefits: Renting may provide some tax benefits for the renters.

  6. Amenities: Renting can provide access to amenities such as swimming pools, fitness centers, and other community spaces that may not be available to homeowners.

  7. No property tax: Renters don't have to pay property tax which is a significant financial burden for homeowners.

  8. No mortgage: Renters don't have to worry about mortgage payments, which can be a financial relief for those who are struggling to make ends meet.

  It's important to note that there are also some downsides to renting, such as the lack of control over the property and the inability to build equity. However, for many people, the benefits of renting outweigh the downsides.

cars: 

There are several key benefits to buying a brand new car as opposed to a used one:

1. Warranty: A brand new car will typically come with a manufacturer's warranty, which can provide peace of mind and protection against costly repairs in the event of a mechanical failure.

2. Reliability: A new car is less likely to have any major issues and will be less likely to break down compared to a used car.

3. Safety features: New cars often come with the latest safety features such as lane departure warning and automatic braking systems, which can help to protect passengers and other drivers on the road.

4. Efficiency: Newer cars are often more fuel efficient than older models, which can result in significant cost savings over time.

5. Customization: Buying a new car allows for customization options such as color, packages, and features.

However, buying a relatively recent used car (3-4 years old) also has some benefits:

1. Lower cost: A used car will typically cost less than a new car, which can make it a more affordable option for many buyers.

2. Depreciation: New cars lose value quickly and often depreciate by 20-30% as soon as they are driven off the lot. A used car that is only 3-4 years old will have already experienced a significant portion of its depreciation.

3. Insurance: Insurance for a used car is often less expensive than insurance for a new car.

4. Car history: Carfax and other similar services can provide information about the car's history, including any accidents or damage it may have sustained, which can be important to consider when making a purchase.

Ultimately, the choice between buying a new or used car will depend on an individual's specific needs, budget, and preferences. It's important to consider the pros and cons of each option and to carefully research the specific make and model of any car you are considering before making a purchase.