Money School #5 :The true definition of an Asset

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In this Money School video I explain that a lot of places I have seen get what an Asset and a Liability is wrong. I also set the record straight.

At the end of the day the only thing that matters is that assets make you money, liabilities take your money away,

And yes I’m against drunk driving.. deal with it.

Due to thefts I’m forced to say here that like all my videos, all my content is copyrighted and owned by myself through a LLC I setup. Please do not mirror or translate.

Comments

honestduane says:

I posted a new money school.. check it out.

honestduane says:

@Dr3wBrN3r Never called you a troll.. trust me, if I thought ou where trolling I would have said so explicitly 🙂

honestduane says:

@Dr3wBrN3r If you are not running your own finances like a company – doing quarterly audits of your books/assets/liabilities, expecting profit from your endeavors, etc – then in my opinion you are not managing your finances correctly. A lot of things companies do can be applied to personal finance.. you just need to learn and do it.

Dr3wBrN3r says:

@honestduane Anyways, I don't want to come across as a troll, I just enjoy the discussion.

Dr3wBrN3r says:

@honestduane Thanks for answering. This is definitely an interesting discussion. I come from a formal accounting background, so I see both sides of the the issue. To me this discussion is really defining the difference between corporate financial statements and personal financial statements. In my opinion a personal financial statement has one thing that is impossible to quantify and that is quality of life or as I would call it utils of enjoyment, while businesses only have the bottom line.

honestduane says:

@Dr3wBrN3r This is a complicated question because you are losing money – buying power is coming out of your pocket due to inflation – so its a liability, but at the same time having liquid funds/capital is an asset in times of crisis.. so I would consider this to be a Hedge Investment – an investment made only to mitigate future risk – as long as the amount in savings is not too much.

I will cover this in greater detail in a future video.

Dr3wBrN3r says:

Honestduane, thanks for taking the time to make your videos. I found your channel a few days ago and have really enjoyed watching as you share your experiences and knowledge with us. I have a question on the topic of defining an asset. Would you consider the cash in your personal checking account accruing interest at a lower rate than inflation is weakening the buying power of that cash an asset or liability?

honestduane says:

I will post one soon.. but at work today. The cost of being successful is that sometimes you have meetings in the ceo board rooms of downtown skyscrapers on the weekends :/

LAnonHubbard says:

OK. Understand this. Time for #6… 🙂

honestduane says:

@greengrass02731985 It doesn't matter if the taxi uses up a billion $ of fuel; as long as it brings in more money than it spends its still an asset.

This is whats known as "The cost of doing business". Look up Cost Based Accounting.

honestduane says:

@greengrass02731985 You clearly misunderstood things. Or your a troll.

Understand this: A Tax Company (like an LLC that owns the car that needs the fuel in your example)i, if it makes money, is as Asset. The definition of an asset or liability is based entirely on if its cash-flow positive or not. In this case, the Asset (The Taxi Company) would own a liability (The car that needs gas/petrol) and it would be perfectly fine. But a taxi that uses fuel without making money is a liability.

Andrew Berscheid says:

With you definition nothing could be an asset. A taxi vehicle, while making money through taxi fairs, still requires fuel, which according to you is a liability. Thus, does this make it a quasi asset. Your reasoning is silly.

Andrew Berscheid says:

You're silly.

honestduane says:

@gobbo241 And that the problem; The law and the what the banks tell people do not take this into account, because its more profitable for them to just keep them ignorant. And there is nothing wrong with a liability that makes you money; I just like to know what the cost of doing business really is.

gobbo241 says:

I agree I have made this mistake before thinking about this realistically. Even more than this though almost all assets with have their own degree of risk or liability for not generating income, I guess its always about a calculated risk.

suvarenee says:

of course, if they're offering factual information that might disprove what is being said, now that's a different story and I have absolutely no problem with it.

suvarenee says:

//one of my subscribers told me how much I sucked// This happened to you too?lol Always check their uploads, trolls typically don't have any uploads (where they are in the video) and they hide behind anonymity. It's easy to be critical of others when you, yourself, have nothing available to also be evaluated and critiqued. I see tons of crap on youtube but I don't waste my time evaluating someone else's presentation with my personal, subjective opinion. You're doing great!

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