What are assets?
An asset is any economic resource you own or control. They can be liquid (checking accounts, savings deposits, index funds) or illiquid (real estate, private business equity, vehicles).
What matters for your net worth is not what you paid originally, but what your assets are worth today on the open market.
- Liquid assets: cash, checking accounts, money market funds, index funds, stocks, ETFs.
- Illiquid assets: real estate, private company shares, vehicles, valuables.
- Productive assets: yield-generating investments (portfolios, rental property).
- Non-productive assets: utility assets (primary home, personal vehicle).
What are liabilities?
A liability is any financial debt or obligation that reduces your net worth. The most common liabilities are mortgages, personal loans, car loans, and credit card balances.
Not all debt is created equal. A low-rate mortgage on an appreciating asset is vastly different from 20% interest consumer credit card debt. Distinguishing productive debt from toxic debt is key.
How to classify your balance sheet correctly
Perform a comprehensive inventory. First list all assets at current market value. Then list all outstanding debt balances. The difference is your net worth.
The most common mistake is counting a property's gross market value without subtracting the remaining mortgage balance. A €300,000 home with a €200,000 mortgage adds only €100,000 to net worth.
From inventory to a system
Once assets and liabilities are classified, the natural next step is tracking your personal net worth regularly and connecting it to your cash flow.
Apply This Knowledge to Your Real Finances
eXcenda combines net worth, expenses, simulations, and macro context into a single app so you can move from theory to action.
Frequently Asked Questions
Yes, but only its net equity (market value minus remaining mortgage). Be conservative with valuations since it is an illiquid asset you rely on for housing.
Yes. They are short-term, high-cost liabilities. Paying them off immediately offers one of the highest guaranteed returns available.
Yes, though with liquidity restrictions and income tax implications upon withdrawal. Their true net value depends on your marginal tax rate.