How to optimize family assets and liabilities


Here’s how to improve financial literacy and optimize your family’s assets and liabilities.

What are assets and liabilities?

Assets are values of a long-term nature, that is, anything that costs money and can be sold in the future: an apartment, a summer house, a car, household appliances, jewelry. This category also includes investments (stocks, bonds, deposits), cash, and non-cash funds.

Some assets generate income, while others require ongoing expenses. You can live with this (if it is an apartment where the family lives) or try to increase profitability (for example, to open deposits with more favorable conditions).

Liabilities – the family’s financial obligations (loans, debits, credits). The more of them, the closer you are to the “debt pit”.

Important: In accounting terms, liabilities also include sources of their funds (salary, interest on the deposit), at the expense of which the assets were acquired. But unlike a company, a family has no share capital or retained earnings, so consider that own funds will sooner or later become an expense.

What is the difference between assets and liabilities according to Kiyosaki

“The rich buy assets and the middle class buy liabilities, which they consider assets” – Robert Kiyosaki, American businessman, investor, and author of “Rich Dad, Poor Dad”

In 1997, Kiyosaki formulated his definition of assets and liabilities:

  • Assets – anything that generates income (investments, securities, rental properties).
  • Liabilities – anything that generates expenses (loans, personal real estate).

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According to Robert’s book, an asset can become a liability and vice versa, depending on whether it generates positive cash flow.

For example, a car can be an asset if it helps earn money or liability when money is spent to maintain it, but it continues to stand in the yard. As long as your inherited apartment is empty, it’s a liability because you have to pay the utilities. But if you rent it out and get extra income, it becomes an asset.

Important: Kiyosaki’s definitions of assets and liabilities are technically incorrect from an accounting standpoint, but the general concept is useful for understanding how to spend and allocate money.

How to Calculate Family Capital

The clearest indicator of a family’s financial health is net worth.

Net worth (or net assets) shows how much cash you have left after selling all assets and paying off all debts.

To calculate this indicator, write down all assets (income and non-income) in the left column and all liabilities in the right column.


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