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An Unfiltered Look at My Biggest Financial Liability

I love saying that it was when I learned about net worth that I finally knew the rules of the wealth-building game. That it was the turning point when Selenid and I became empowered to build our path to financial freedom – a path we are still on today. Because by building assets and reducing liabilities, we finally understood how to improve our financial situation. However, looking back on things today, I realize we still carry our biggest financial liability today…

The rules of the game

Net worth is the measurement of your wealth. It is the rules of the game of personal finance. Understanding net worth therefore teaches you the rules of the game and lets you start playing…and winning.

What then, is net worth?

In very simple terms, net worth is equal to your assets minus your liabilities. So then, what are assets and liabilities? Many definitions of assets and liabilities exist including some that are unnecessarily long and complicated. Simply put, assets are anything you own that put money in your pocket. This includes things like stock or bond investments and cash-flowing real estate. Conversely, liabilities are anything that takes money out of your pocket. The most common liabilities are debt and non-cash-flowing real estate like our primary homes.

Net Worth  =  Assets (Put Money in your Pocket) – Liabilities (Take Money Out of your Pocket)

Again, what is interesting to note in this calculation of net worth is that your income does not come into play. You will not find income listed anywhere on any net worth calculator. 

So, this equation teaches us how to calculate our current net worth. Thus, we have an accurate measurement of current wealth.

The name of the game is to maximize assets and minimize liabilities. Especially whatever our biggest financial liability is.

But what are assets? What are liabilities?

Now that we know the players in the game, we need to understand what they are.

And let me tell you, there are a lot of complex definition for these two terms out there. But let’s keep it simple. That’s the whole point, right?

Assets are anything you own that put money in your pocket. Liabilities meanwhile are anything that takes money out of your pocket (These definitions are courtesy of Robert Kiyosaki in Rich Dad, Poor Dad).

So, our updated net worth equation is:

Net Worth  =  Assets (Put Money in your Pocket) – Liabilities (Take Money Out of your Pocket)

Let’s have some quick examples

I’m going to list some things. Decide if you think they are an asset or a liability. I’ll list my classification for each below.

  1. Your personal house
  2. Your retirement account
  3. A whole life insurance policy
  4. The car you are leasing
  5. Your cash-flowing rental property with a mortgage
  6. Your student loans
  7. A taxable brokerage account

Ok…here’s my answer key (argue about it if you must in the comments below!)

  1. Liability
  2. Asset
  3. Liability (in just about all cases but a few)
  4. Liability
  5. Asset
  6. Liability
  7. Asset

How’d you do? Did any answers surprise you? If they did, thing about it in a very simple way…does that item take money out of your pocket or put it in your pocket?

The home you live in, likely with a mortgage…definitely takes money out of your pocket. Also, if you lost your job and couldn’t pay the mortgage, what would happen? The real owner of the home, the bank, would come knocking and take the home. Same goes for a car loan or lease.

Compare that with a cash-flowing rental property like this one of ours. If you lose your job, your tenants keep paying rent. Money keeps going into your pocket. That, my friends, is an asset. Same for retirement accounts, taxable brokerage accounts, and the like.

Evaluating our biggest financial liability

For most physicians, their biggest financial liabilities will be #1 and #6 on the list above. Student debt and the mortgage on their primary home.

That’s what I used to think that mine were. But I was wrong.

Turns out our biggest financial liability is something else completely. We viewed it as an investment, which is what I will refer to it as below. But it’s a liability. And to be honest, we haven’t done much to control it.

I’ll dig in…

A timeline of events

In 2018, Selenid and I took ownership of our investment. The first of its kind for us. Keep in mind, this was well before our financial comeback story and our financial education.

So judge easy.

From the beginning, this investment required high initial upkeep to maintain its value. Each month, we contributed anywhere from 10-20% of my trainee paycheck to the investment. Once it matured a bit, high contributions were necessary to the tune of 40% of my paycheck.

Then, in 2020, we invested similarly once again. While the financial returns on this first were minimal at this point, we believed in the process and felt future gains were very likely. At this point, I was closer to beginning my financial education. But not quite there yet. Instead, I was burned out and not quite sure of the source of my burnout (later identified as a lack of financial well-being).

Now there were two investments to maintain with contributions. Sure, we got some multiple discounts. But still about 40+% of my paycheck went towards contributions.

Lastly, in 2023, after much discussion, we made the same investment again. Thankfully, I was an attending surgeon at this point. However, as you will see below, financial analysis is not pretty. We still have yet to see any financial return on these investments.

Financial analysis

This analysis is a reflection of the financial reality at the time of this writing using 2024 US dollars.

Our investments continue to require monthly contributions for maintenance. These contributions total roughly $8,000 monthly.

Our returns have been modest at best. So far these returns average $0 monthly.

So, is this truly an investment or a liability?

Yeah, you got me. Despite my hope and naivety, there is no way that I can, in good faith, classify this as an investment.

I mean, using my own definitions above, this is definitely not putting money in my pocket. Our in depth analysis above demonstrates pretty resoundingly that it takes money – a whole lot of money – out of my pocket every month.

That reeks of liability.

But what about future returns?

It’s a fair question. The whole idea is that contributions today will lead to returns and yields in the future. Isn’t that what an investment is anyway?

Well, yes…kind of. An investment is something that you contribute to today to gain returns later. But you can also call on those returns at any point during the investing period.

This is why a primary home is not an investment. It takes money out of your pocket now and might be worth more in the future. But you can’t do anything about that now. Even if you sell your home now and it is worth a bit more, you still need to buy another home to live in…

It’s time for me to come to grips, it’s a liability. And I hate to say this, but there’s not much we can do about it…

What is our biggest financial liability?

Some of you may have guessed by now. They go by the names Samuel, Emery, and Camilo. Far and away, our biggest financial liability are our children! And their monthly expenses include private school, a nanny, food (so much food!), activities, diapers, etc.

biggest financial liability
The culprits!

I came to this realization at a conference that I was speaking at recently. Afterwards, during the Q&A, someone asked me what my biggest liability was. In the past, I had always answered my student debt or primary mortgage.

But this time, for whatever reason, it hit me like a ton of bricks. Those weren’t the things taking the most money out of my pocket (sometimes literally) every month. It was my kids. Which is what I answered after chuckling to myself…to a lot of laughs and a lot of head nods.

Because, unless your child becomes a movie star or professional athlete (maybe), your financial return will pretty much always be nil on this investment.

But thankfully that’s not the point…

My hopes for this post

This is obviously tongue in cheek. Children do not actually count in our net worth equation. But they do count as a big expense…

And thankfully we, and presumably everyone else, did not have children for financial returns. We did it out of love and for emotional returns. As I’m sure you will agree, our children have already given us greater returns in this regard than we could ever have imagined.

Either way, I don’t know why I found it so funny when I internally started thinking about it more after that talk I gave. I knew I just had to write this.

But I do think there are some relevant serious lessons for all of us here:

In the meantime, I do not recommend performing an investment analysis on your kids!

What do you think? Are kids a financial liability? Why or why not? What is your biggest actual financial liability? How are you managing it? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

    2 thoughts on “An Unfiltered Look at My Biggest Financial Liability”

    1. Would you ever buy life insurance on your kids to protect against that “liability”? After investing so much in them if God forbid something happened to them you would be out a lot of money— maybe life insurance would mitigate some of that risk.


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