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What are Assets?

Assets are valuable possessions that contribute to building wealth, such as cash, property, investments, and vehicles. These resources can appreciate in value over time, helping you grow your financial foundation. By strategically managing and acquiring assets, you can pave the way toward achieving financial freedom.

What are liabilities?

Liabilities are debts or financial obligations you owe to others, such as loans, credit card balances, mortgages, or any other amounts you need to repay. They represent money you must pay back in the future, impacting your overall financial health.

How Is Net Worth calculated?

Net worth is calculated by subtracting your total liabilities (what you owe) from your total assets (what you own). The formula is:

Net Worth = Assets - Liabilities

A positive net worth means your assets exceed your liabilities, while a negative net worth indicates your liabilities are greater than your assets.

How Can Something Be Both an Asset and a Liability?

Something can be both an asset and a liability depending on how it's managed. For example, a house can be an asset because it may increase in value over time. However, it can also be a liability if it comes with significant maintenance costs, mortgage payments, or property taxes that outweigh its potential value growth. Essentially, if an asset requires ongoing expenses or debt that reduces its net benefit, it can act like a liability as well.