Assets/Liabilities, Commodities too

Many of you probably have had a discussion with someone about assets VS liabilities. People tend to view assets as things that are valuable and/or increase in value (i.e. - real estate, stocks, bonds, jewelry, etc). Whereas liabilities are things that decrease in value or cost you money (i.e. - cars, electronics, credit card debt, etc).

Well, I want to address this in a bit more depth and also add the concept of "commodities" to the discussion. For the purposes of this post I would like you to consider a commodity something (or some "thing") that is plentiful but easily replaced. With this in mind, I'd say that assets trump commodities but commodities trump liabilities. I won't delve into the realm of the commodities market or anything like that but the existence of such a market does support the argument/statement I'm about to make in some ways.

Assets are things that are valuable. We all NEED to have some assets. Assets are what gives us our net worth. However, assets require a certain level of weatlh, shrewdness, intelligence/education, or saaviness to obtain, right? For example, not everyone can afford to buy a house and a house is one of the most basic/useful assets a person can have. In addition, not everyone can buy stocks or bonds. In a certain sense, you have to have money to make money. It takes money to buy a house and it takes money to buy stocks. But if you have never been educated about stocks or real estate, you don't have the educational capital to even begin thinking about saving the monetary capital to obtain these assets. Again, it takes a certain level of wealth and intelligence/education to obtain an asset.

Commodities are typically things that there's a large amount of, that are consumed, and tend to not increase in value and typically are consumed or thrown away before they decrease of lose all their value. I'd like to highlight the commoditization of people for a second though. In the corporate world today, certain people/positions are commodities. For this reason, you have to make yourself a "human" asset. Human commodities are people who perform jobs that require little effort, are very systematic, and that there's a large pool of people who can do those exact same duties (see/read the picture above?). In a sense, I feel like a commodity as a web developer. Not a lot of people are web developers in the big scheme of things, but there are at the same time, a large number of people that could perform this job. So daily, I find myself thinking of ways to set myself apart from other web developers. I find myself thinking of ways to make myself more of an asset today and in the future. I think we all need to assess whether we are simply an organizational commodity or an asset when thinking of our long-term career goals, especially when you're considering long-term job security. Why? Because commodities are consumed; and they tend to not increase in value (pay) and typically are consumed (used up) or thrown away (fired) before they decrese in value (start losing money for the company). When a company downsizes, who do you think are the first people to be "let go"? Think about that for a minute.

Liabilities are those things that cost you money. That nice *insert popular expensive car name here* you see is costing someone (most likely) not only monthly payments but ridiculously high maintenance fees. Oil changes, brakes, and routine maintenace on the average *fancy* car are twice as expensive as they are on a less expensive car. I've learned about liabilities through my own mistakes and part of the reason for this post is so that others will be a bit more educated and seek to learn more so that they won't make similar mistakes. Most things that are marketed to those of us who are young are potential liabilities. Your iPod, automobile, big screen television, etc. are all liabilities in a sense because more likely than not they'll cause you to spend more money than they'll make for you. Some things are necessities like food and clothing so I would not consider these liabilities necessarily. They fall more into the commodities category.

Bringing all this together, I want to say that we as Black people tend to be less educated about assets and how powerful they can be. Not to mention financial management in general. Assets will always be there for us to purchase. Liabilities will always be somehow a part of our life. Reduction of liabilities and smart management of our liabilities should be our goal(s). Commodities will always be around in both human form and other forms. That's just how most societies work. There are things that are consumed. The most important part of this post is knowing what a liability is and hopefully thinking about some financial decisions in terms of whether that big purchase is a liability or it's an asset. Where will that TV be 10 years from now? How much could you sell it for (if you had to) 3 years from now? Understanding that some things are going to be purchased regardless of if they're an asset or a liability, we should still keep these things in mind.

I never had anyone explain this stuff to me until...