liability
A liability is anything you owe to someone else, and anything that takes money out of your pocket every month.
In plain English
A liability is a debt. Money you owe, whether to a bank, a lender, a supplier or your cousin.
That is the accounting definition, and it is correct. But the version that changes behaviour is broader. A liability is anything that reliably takes money out of your pocket, month after month, and gives you nothing back that grows.
The loan on the car is a liability. So, in truth, is much of the car. It costs you fuel, repairs, insurance and value every single month, and at the end of ten years it is worth a fraction of what you paid. Nobody wants to hear this, especially in a culture where the car says something about you.
None of this makes liabilities evil. A mortgage on a property that rises in value and earns rent is a liability doing useful work. Borrowing to buy stock you will sell at a profit is a liability with a job.
The question is never whether you have liabilities. It is whether each one is helping you get somewhere, or simply making your life look better while making it quietly poorer.
You take a ₦3 million loan to buy a car. The loan is a liability. The repayments, the fuel, the insurance and the falling value all take money from you every month, and none of it comes back. Whether that is a good decision depends entirely on what the car allows you to earn.
Questions people ask
Is all debt bad?
No. Debt used to buy something that earns more than the debt costs is a tool. Debt used to fund a lifestyle you cannot afford is a trap, and the difference is not always obvious at the time.
Is my mortgage a liability?
Yes, the mortgage is a liability. The property is an asset. Whether the pair works for you depends on the rate, the rent and what the property does over time.
How do liabilities affect my net worth?
Directly. Net worth is what you own minus what you owe, so every liability pulls it down until it is cleared.
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