How to optimize family assets and liabilities

he USAID data shows that Ukraine and Poland rank last among the 30 countries surveyed in terms of financial literacy. At the same time, 58 percent of those surveyed with the worst financial literacy scores felt they had at least an average level of competence.

We tell you how to improve financial literacy and optimize your family’s assets and liabilities.

What are assets and liabilities
Assets are values of a long-term nature, that is, anything that costs money and can be sold in the future: an apartment, a summer house, a car, household appliances, jewelry. This category also includes investments (stocks, bonds, deposits), cash and non-cash funds.

Some assets generate income, while others require ongoing expenses. You can put up with this (if it is an apartment where the family lives) or try to increase profitability (for example, opening deposits with more favorable conditions).

Liabilities – the family’s financial obligations (loans, debts, credits). The more of them, the closer you are to the “debt pit”.

Important: In accounting terms, liabilities also include sources of their own funds (salary, interest on the deposit), at the expense of which the assets were acquired. But unlike a company, a family has no share capital or retained earnings, so consider that own funds will sooner or later become an expense.

What is the difference between assets and liabilities according to Kiyosaki
“The rich buy assets and the middle class buy liabilities, which they consider assets” – Robert Kiyosaki, American businessman, investor and author of “Rich Dad, Poor Dad”

In 1997, Kiyosaki formulated his definition of assets and liabilities:

Assets – anything that generates income (investments, securities, rental properties).

Liabilities – anything that generates expenses (loans, personal real estate).

According to Robert’s book, an asset is capable of becoming a liability and vice versa, depending on whether it generates positive cash flow.

For example, a car can be an asset if it helps you earn money, or a liability when money is spent to maintain it, but it continues to be parked in your yard. As long as your inherited apartment is empty, it’s a liability because you have to pay the utilities. But if you rent it out and get extra income, it becomes an asset.

Important: Kiyosaki’s definitions of assets and liabilities are technically incorrect from an accounting standpoint, but the general concept is useful for understanding how to spend and allocate money.

How to Calculate Family Capital

The clearest indicator of a family’s financial health is net worth.

Net worth (or net assets) shows how much cash you have left after selling all assets and paying off all debts.

To calculate this indicator, write down all assets (income and nonincome) in the left column and all liabilities in the right column.



If the result is more than zero, you are doing everything right. If it’s negative, you should urgently optimize your assets and liabilities before you fall into a “debt hole.

58% of Ukrainians said that several times in the last 12 months their income didn’t cover the expenses and at least 30% needed to borrow money.

How to optimize family assets and liabilities

There are 2 ways to increase your capital:

  • Increase assets and/or profitability
  • To decrease the number of liabilities and the cost of borrowing money

Important: Make sure that you don’t increase your liabilities along with your assets. For example, if you buy an apartment, your assets increase, but if you take out a mortgage, your liabilities increase too.

To analyze assets and liabilities, make a table in which you indicate:


  • value (market average)
  • cost of the asset
  • profitability (positive and negative)

In liabilities:

  • amount owed
  • interest rate
  • monthly payment
  • term

After filling out the table, pay attention to the assets that yield less than the interest on the liabilities (either increase the yield or cover the liabilities with them), and determine which of the liabilities has the strongest impact on the family budget.

Optimization options:

  • Sell unnecessary, rent out, exchange
    to sell unprofitable real estate (or other property) and invest the money in repayment of obligations, or to buy income-generating assets
    reduce the cost of maintaining an apartment/car
  • To reduce the cost of borrowed funds (refinancing or restructuring)

Example. A conditional family currently has the following assets and liabilities:

  • A bank deposit of 200 thousand UAH, the rate of 7.5% per annum, annual income – 15 thousand UAH.
  • The inherited apartment is leased out. The approximate cost is 700 thousand hryvnias, the amount of rent is 5 thousand hryvnias per month.
  • The apartment in which a family lives, worth 900 thousand UAH. The payment of utilities is 2 thousand UAH/month.
  • Car worth 540 thousand + annual service of 50 thousand UAH.
  • The garage is valued at 270 thousand UAH. Annual fees + payment of electricity is approximately 7 thousand UAH.
  • Loan in the amount of 100 thousand UAH at 10% per annum.

Important! Do not confuse the assets with the income. The income is something that comes in and can be completely spent (e.g. a salary), and an asset remains (you bought real estate, put money on deposit). In addition, you should not confuse expenses and liabilities. Expenses are what you spend (food, clothes, renting an apartment) and liabilities are what you owe (mortgage, loan, debt to a friend).

You are left with contingent liabilities – the apartment your family lives in and your car. These expenses total 74 thousand UAH, income after opening a new deposit and repairing grandfather’s apartment – 118 thousand UAH. Thus 16 thousand losses turned into 44 thousand income, which can also be reinvested.

This is a simplified version of optimization, but it clearly shows that your property should work for you, not you for its maintenance.


Leave a Reply

Your email address will not be published. Required fields are marked *