This is the companion piece to our article on what actually counts as an asset. If an asset, by the practical cash-flow definition, is something that puts money in your pocket, a liability is its mirror image: something that takes money out, month after month, whether or not you’re using it.
The Traditional Definition vs. the Practical One
In traditional accounting terms, a liability is simply anything you owe, a debt, a loan balance, money legally owed to someone else. That’s accurate but incomplete for everyday decision-making. The more useful, practical definition, popularized by writers like Robert Kiyosaki, asks a different question: does this cost you money every month, regardless of whether it’s technically “debt” in the legal sense.
10 Things That Are Actually Liabilities (By the Cash-Flow Definition)
- A car loan, especially on a vehicle that depreciates faster than the loan is paid down
- A mortgage on a primary home, since it costs money monthly without generating income back, regardless of long-term appreciation
- Credit card balances carried month to month, compounding against you instead of for you
- A timeshare, which combines an upfront cost with ongoing fees and notoriously little resale value
- Unused subscription services, small individually, real money in aggregate
- A boat, RV, or other recreational vehicle sitting unused most of the year while still costing insurance, storage, and maintenance
- Student loans for a credential that hasn’t translated into increased earning power
- A home equity line of credit used for consumption rather than investment
- Store credit cards with high interest rates opened for a one-time discount
- “Good debt” that isn’t actually generating any return, a category people often assume is automatically safe simply because it’s labeled that way
Where the Real Confusion Lives
The most common financial blind spot isn’t obvious debt like credit cards, most people already know those are liabilities. It’s the assets that are quietly functioning as liabilities without anyone noticing. A primary home is the clearest example: it’s genuinely valuable, it may appreciate significantly over time, and it’s still, from a monthly cash-flow standpoint, a liability the entire time you own it, since it costs money every month rather than generating any.
This isn’t a case against homeownership, mortgages, or reasonable debt used deliberately. It’s a case for accuracy: knowing which of your monthly obligations are actually working against your cash flow helps you make clearer decisions about which ones to pay down first, and which ones might not be worth taking on at all.
What Scripture Says About This
Proverbs 22:7 states it plainly: “The rich rule over the poor, and the borrower is slave to the lender.” (NIV) That’s not a condemnation of every form of debt, Scripture doesn’t treat all borrowing as sin, but it is a clear-eyed warning about what debt actually does: it creates real obligation and real vulnerability, even when it’s fully legal and even when it’s labeled “good.” A liability, understood honestly, is exactly that, an ongoing claim on your future income, whether that claim comes from a predatory interest rate or a perfectly reasonable mortgage.
The Practical Takeaway
Building real financial margin usually means doing two things at once: acquiring more of the things that put money in your pocket, and being honest about which of your current obligations are quietly taking money out. Most people already have a clearer sense of their assets than their liabilities. Listing both accurately, using the same practical definition, tends to be the more uncomfortable exercise, and the more useful one.
This content is for educational purposes only and is not personalized financial advice. Scripture quotations taken from The Holy Bible, New International Version® NIV® Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.® Used by permission. All rights reserved worldwide.
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