Do Not Buy Liabilities Thinking It as Asset!!
Most of the people think that they are purchasing the asset which end up in the liability of them without their consent.
Asset is something that generates income through out. Liability is something that drains your income.
Example: Purchasing a car
People think it is a asset but when you analyse from the position of middle class people. They purchase a car through loan from financial institutions. They borrow money to buy a asset (Car). The moment when your car reaches your home its value is reduced by 15% . And your liability is increased by 15% .
Liability includes Interest on borrowings, Fuel Cost, Maintenance of Vehicle, Insurance.
People think they have asset (Car) worth lakhs but It will not be considered as asset by any financial institutions and neither it will generate any income and depreciate over years.
Asset is something which adds to your networth. Asset will generate income and appreciate over years.
It doesn't mean that you should not purchase a car. Generate additional income to compensate the liability and purchase a car.
MentoTax is here to guide you to build your assets and boost your Financial Independence.
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