What was your reaction when you read the word Liabilities?
What was the first thing that occurred in your mind when you processed that word in your brain? Did terms like Home Loan, Vehicle Loan, Education Loan, Personal Loan pop up in your mind? Was there an eerie feeling with the thought? No matter how little or how strong the feeling, did you experience some chill? In our minds the word Liabilities is tagged along with some fear, some alert warning with it, it is a little feeling of avoidance of a responsibility that you somehow want to stay away from it but you could not. So, every time you want to keep a safe distance from it.
Liabilities are things for which we are obliged or responsible for, be it in a monetary view or in any other means. And today I would like to talk particularly about Financial Liabilities, some of which are mentioned at the beginning of this article. And I would like to discuss one’s behavior with one’s Liabilities. How do we react to it, what are our feelings for the same.
Now a person has some strange relationship with their Liabilities which is very difficult to describe and limit it to few words because one and the other person doesn’t feel the same about it. One has strong feelings while one has little less while some doesn’t care much. But everyone once in their journey of life, their cycle of life has faced it and is involved in Liabilities.
Now, I basically categorize two kinds of Reactions to one’s Liabilities.
Ignorance and Over Involvement.
I define Ignorance as a reaction to Liabilities when one doesn’t pay heed to their own liabilities, they like to stay away from it and they even don’t like to discuss it with their close ones, and the others don’t even stand a chance for a discussion like Financial Advisors. It is very difficult to make them comfortable to talk about their own Financial Liabilities by an Advisor. There is an ignorance of fear that they experience from their own Liabilities. The reaction is strong and hence they don’t like to fiddle with their interest or due payments, they don’t differ it, they even don’t like to pay all at once and get done with it and instead in case of some unexpected income, they invest the extra money rather than paying the loans. They like to keep the cycle as it is and they don’t want to change it.
This is what I call Ignorance of one’s Liabilities.
The second reaction, Over Involvement, is a bit tricky. There is a thin line between getting Involved and getting overly involved with one’s Liabilities. So many of us don’t realise crossing the thin line and which is the second reaction to one’s Liabilities.
This reaction involves inquiring about the liability more frequently, making changes to the payment cycles, differing the payments more frequently by paying some extra charges, and the worst of all, getting a new loan financed to make payment of the previous loan. One gets so much involved that they don’t realize getting into the vicious circle of Liabilities and then find themselves in a state of total mess which is difficult to recover from.
Now, many of you might have experienced one of the two reactions or both but would find themselves stuck and have no clue about what to do next. So why does this happen?
Because Liabilities aren't explained to us. It is not taught or explained to us when we talk about Finance. The irony is it is not at all discussed when Future Plans of money is talked for. The only thing that is discussed is either Investing Money, how to get extra returns, how early to earn this amount of money, and whatnot.
Earning more and more is the only thing discussed when talking of Financial Growth. Very rarely Liabilities are discussed, cutting extra outflows is discussed. I am not on the point that Financial Planners don't consider Liabilities Management as a service or an option but I am on the point of view that Financial Planning is not even considered as an option.
Every investor would have faced an advisor that will suggest that plan or other and even suggesting them Insurance as Investment Products but no Sales Agent discusses Liabilities Management or Expenses Management because they aren't concerned with their clients' requirements, they are concerned with their Sales and Commission and even if they are the latter comes first and the clients' interest afterward.
Our minds aren’t programmed to feel comfortable with Liabilities. Our minds aren't programmed to see Liabilities as a viable option. There is some kind of an instinct attached to it in our minds. Liabilities are not always bad. Sometimes it is the only good option. It is just that Liabilities are not clearly understood or explained to you.
One shouldn’t get scared or have a sense of fear whenever dealing with liabilities. You just need to measure it on the scale of how financially is this going to affect you. In the coming articles, we shall discuss more about Liabilities and we shall also discuss some Liabilities in numbers and some options to weigh out Good and the Bad. Till then,
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