Income Assets Expenses Liablities and The Liability Trap

 

This is a very basic diagram to bring some points to the light for my clients. There are four quadrants in which we have kept income, assets, expenses and liabilities(loans).

1. Which parameter can you control?
2. If you increase your income, you can increase your assets or expenses.
3. If you increase your expenses, you can increase your liabilities or loans.
4. Income and assets are in positive quadrant which keeps you up.
5. Expenses and liabilities are in the negative quadrant which drags you down.
6. If you can't control your expenses, you will always remain in trouble.
7. If you are in a liability trap, you ignored your income and expenses, that is why you are there.
8. It is very very difficult to create and maintain a SIP of ₹5000 but very easy to start a loan with an EMI of ₹20000 that is why most people are good at loans or liabilities but very poor at assets side. 
9. One of the reasons why we never prepare for a goal before going for it to create a corpus for the downpayment but are all focused to pay off our loan before time once it starts. Maybe we are complacent when everything is fine but start focusing under huge pressure of EMIs, just like the rabbit who thought to take rest during the race and lost it due to his complacency.

This is how we decide to live in the present but completely ignore our future. A balance needs to be created between them.

The choice is yours.

Regards

Arvind