e tend to think of ‘assets’ and ‘liabilities’ as being lofty accounting terms that don’t apply to us; people who only have their personal finances to think about. However, the truth is that assets and liabilities are relevant for everyone, and they have a massive impact on your overall financial health.

How are ‘assets’ and ‘liabilities’ defined?

Also known as ‘profits’ and ‘losses’ in the business world, an asset is generally anything that brings money in and a liability is anything that takes money out. They impact the overall value of your estate in the sense that having too many liabilities could bring your net-worth into negative values.  

A good way to think of an asset is something that perhaps increases in value over time, or could be worth something when sold. This could be anything from a house to a car or a bicycle.  

However, in personal finance as opposed to business finances, the line between what is an asset and what is a liability is less defined. For example, a house can be an asset, owning one most likely makes up a huge chunk of your net worth. However, a mortgage is a liability, what you own against the house, so the worth of your home is it’s total value minus the loans that have been taken against it.  

Examples of personal assets

So, let’s dive into some examples of what could be considered ‘assets’ for the average person:

Property and car

• As mentioned, these two assets can fit into either category but the chunk of money that you have paid off and own outright is an asset.   This asset can often increase in the case of a house, or decrease in the case of a car, over time.  

Valuable Items

• This could be jewellery, artwork, antiques or anything you own that will retain its value throughout the years. In Auderli, you can upload details about your valuable items and they will be included in your instant net-worth calculation.  

Bank accounts

• Probably the most obvious asset is the money that is already held within your bank accounts and ISAs. It doesn’t have to be sold in order to be valuable, and if your bank provider offers good interest rates then it will most likely increase in value over time.  

Stocks and Shares

• With inflation, stocks, shares and any other investments are an asset and can increase in value over longer lengths of time.  

Liabilities

As you might expect, there tend to be more liabilities than assets in the average person's financial portfolio. It may be beneficial to think of a liability as a recurring yet often unavoidable cost. Here are some examples:

Mortgage, Bills and Rent

• These liabilities are an unavoidable part of owning or renting a home, and can make up a significant chunk of your outgoing payments.  

Loans, overdrafts & credit cards

• Repaying any kind of loan is often a long-term commitment and one which takes away value from your overall net-worth until it is paid off.

Tax

• As something which takes away from your overall income, tax liability (as it’s sometimes called) is one that everyone has to pay at some point in their life.  

Travel  

• If commuting to work, travel costs are often a huge liability and can subtract a fair amount from your daily income. Although travelling might not significantly detract from your overall net-worth, it’s regular costs such as these that pool together and form a larger liability.  

Subscriptions

• Nowadays, subscriptions to video and music streaming platforms for example are becoming more and more necessary if you want to enjoy the latest entertainment. Although not a huge expense individually, the cost can rack up once you’re subscribed to a few different platforms.

With this in mind, liabilities aren’t necessarily ‘bad’. In the case of student loans, you are investing into a future which will hopefully increase how much you’re worth overall. And with subscriptions, you are paying for something you enjoy, which is always a positive. As for mortgages, the money you feel like you’re losing each month goes towards helping you own more of your home. In this sense, some liabilities can also be a positive investment too.  

Hopefully now you feel more acquainted with what assets and liabilities are and how they have relevance in your everyday life. Auderli is here to help you organise your finances and important documents in one place, and to let you take control of your financial wellbeing.

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