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Here is a little bit of accounting knowledge of words that are usually scattered here and there and not necessarily understood. I got their definition by programming and not necessarily from an accounting book, which may make them clearer. A payable is money that you give away. A receivable is money that you make. An asset is anything that has monetary value and including money that you own. A liability is anything that has monetary value and including money that is lent to you, which you will have to give back perhaps with interest.

These words are usually considered complicated because they are all somewhat recursive and that they depend on the point of view. There are such things that are liable assets, which are compound words on the same notions just mentioned above: a liable asset is an asset that can become a liability, such as an asset that comes from a credit card. A credit card is an asset if you have money to pay it back before it becomes a liable burden full of interest. A bad asset is an asset that has lost value, which if in a business that asset was a receivable that suddenly at the end of the line the money did not exist or the source went bankrupt. Insurance usually takes care of bad assets, but if insurance can't afford the bad assets or they themselves have bad assets then that becomes a problem. From your perspective the business owner, your bad asset may be somebody else's bad asset. Another example of a bad asset is a car that was noted as an asset, perhaps for opening a business or doing some purchases with credit, and that it no longer has a 10 000$ or above value that made it so worth it if it would ever need to be sold to pay an urgent liability.

Payables and receivables are exchanged from one point of view to another. When you buy a shoe at a store, your payable becomes the store's receivable. When you use your credit card, that becomes your receivable for a payable that is an asset if you can pay it back right at that moment or a liability if you cannot.

Common Sense

Don't pay loans with loans as that can compound the interest. By loans that also means credit cards. An example of a compound interest is 1 + 10% that equals 1.1, which now gets another interest 1.1 + 10% that equals 1.21. A compound interest makes what you owe grow larger faster, which can be really bad with say credit card interest rates that vary from 18% to 28%.

Only pay for things that you can afford, which means that you have cash assets to pay for the particular good, or are for certain that you will make a receivable from say working to pay what is now your liability. Using liabilities and liable assets make purchasing easy, yet can be very dangerous to the economy and to you because these give you false hopes and false uses for money that you do not have or will not have. Jobs come and go, businesses come and go, dollar values go up and down, and economies do crash, so what do you do when you paid 2000$ for a good using your credit card and now have lost your job and can't pay it? Also, remember credit cards have nasty interest rates. At this awful point you also become someone else's bad asset, and so truly a liability.

If you can think like a business person, that can make you do a smarter purchase and make the possibility of failure much less. Look at what's going on in the world before you make a purchase, and verify that the good's value is worth the buck by doing comparative shopping. Do you have a backup plan if something should go wrong, and have you kept a personal reserve for just in case? If you notice that you may be cut or that work hours will be cut, are you reducing your spending, and are you innovating for plan Bs and Cs. A well managed business can handle the lack of demand, contrary to what the media sometimes say, and if worse comes to worst it can close, perhaps temporarily, without going bankrupt.

Main brands VS no names. Both must go through rigorous tests before being placed on shelves, so both are of quality and both have the possibility of getting problems like any product in the world. Both may be mass produced in China and differ only in name. If no names keep more money in your pocket, especially if you need that extra bit to live, then so be it.

GNU free software like those found on Sourceforge or using Linux operating systems is also a great money saving alternative to shareware, ad-ware, and those that you must purchase. With GNU free software, you can support a project a bit here and there when you can, and according to the price that you think you would like to donate which would help that project grow. With GNU free software there are no annoying 30 day trials, demos, and ad-ware, so no pressure as to when and how much you must donate. GNU free software like any other software can have bugs, and with time can be repaired. You can use a very expensive proprietary software that can get you sued, or may have watermarks, and limitations, and so must be purchased to make money, or alternatively you can use a high quality GNU software like GIMP to make money when you don't have any so to make money so that eventually you can support that project.

The tax system is your friend, contrary to popular belief. Taxes are used to help your close-distance and long-distance surrounding and care. Taxes are invested so that they can help you continue your work or business. What is tax deductible differs from country to country, though the rules are basically very similar. Tax deductible means, that to a certain degree that money you spent will come back to you after you send in your taxes. If you need to do a purchase to achieved a particular means to the nature of your business or job to make money, then that is tax deductible. A newbie is if you are purchasing to improve energy efficiency and bring down energy costs to your house, then that is tax deductible. If you need to use the taxi to go to work everyday, keep the receipts for your income tax and you will get a return, which technically makes the cost of the taxi be zero. If you want to be a web developer and need a computer, well that computer is tax deductible. Eventually though, you have to show that you are making your own profit or else the deductibles may stop or be significantly reduced.

Reserves. A very smart trick to do is to tally up how much you need to survive for one month, and then use that base to make a reserve for 6 to 7 months, or more if you can. If anything should go wrong in life, you can then easily manage. Diversify your banks and diversify your currencies. Whatever your job offers you as "benefits" such as pension plans, match that with your own bank and insurance company, like that if ever the company you work for ever goes seriously bankrupt, you still have those benefits. Ask your bank to open up an account called credit or something of that nature, which this account must be filled with cash that matches the amount that you will spend on your credit card before you go onto a spending spree.

Spread the wealth. This may sound counterproductive, but if you can set aside money each month to literally give it away with not expecting any returns, that can do some good. Use this money to help charities, and do other good deeds like putting a smile on someone else's face by offering them something like a cup of coffee just like that for no reason at all. In some eerie way this money may return to you in exact change, or the deed may cause a set of reactions that will grow a world economy that will then return to your pocket, but that should not be the goal. Become a venture investor (one who expects a return), or angel investor (one who does not expect a return) for a startup company, whether the money will return or not.

If you can put all of this commonsense into habitual practice, BEAUTIFUL!

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