What Is A Liability

Define Liability?

Liability is defined as something that you owe. Or what we call a fancy word for debt.

What is a Liability in more detail?

Liabilities are part of your financial health. When you think about it, do you have a healthy financial health? If not, then keep reading this.

A liability is the money you owe to someone or an institution. This can be a short term or long term depending of what it is. If it is short term it could be a credit card balance and if it is long term it could be a mortgage.

Examples of liabilities are: mortgages, auto loans, student loans, credit card balances and payday loans.

Do you have a good relationship with money? If not then your liabilities can tell you that. Having them doesn’t mean you don’t have a good financial health but it does restrict your ability to build more assets.

Huge amount of liabilities can become a huge problem because your net worth will be negative. Your net worth is your total assets minus total liabilities. So if your liabilities exceeds your assets, then a total net worth also becomes negative. Negative net worth is a hindrance for you to reach your goals and dreams in life. No matter how much your liabilities is, it should not be taken for granted and you should make a conscious effort to pay it sooner, sooner the better.

Keep your liabilities in control. Check your lifestyle and spending habits. Purchase only the things you need versus the things you want. Prioritize the needs over wants, your needs will keep you alive. Your wants will satisfy you temporarily but you can still live without it.

If managing your liabilities is too overwhelming, you can reach out a financial advisor or a credit counseling agency to help you create a debt relief plan.