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What is a Liability

What is a Liability

what is a liability

Is Liability the ability to lie? 

Well, not quite.

Although there is some sound resemblance to the words, liabilites are in fact a completly different thing then lie abilities, at least in the context of this blog.

The term liability comes from the verb “to be liable” which means to be held responsible for something.

In the context of finance and on this blog this reffers to things you posses that are actively taking money from your pocket and making you poorer for owning or using them.

Good examples of liabilites is your car where even after buying it, you have to spend money on gas, repairs, road taxes and likely more.

Similar goes for your home where even after buying it you still spend money on it by renovations, maintenance and possibly other things which again take money from your pocket regularly.

The same holds true for your phone and other gadgets, where alot of times we buy them with loans or other offers where you get the gadget and pay after for it in 12 monthly rates or whatever.

So in essence whatever recuringly takes money from your pocket is considered a liability and you should make sure to not have too many.

Contrary to liabilites are assets.

Click here to get an explanation about assests.

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