generate enough income to replace the human asset in retirementwhen a household borrows it draws on the future income it spends tomorrows income today the repayment of loan hits all three blocks we just discussed reduces income increases expenses and impairs the ability to build assets the loan has to build an asset that will nullify all three effects to be worthwhile ask if your home loan will meet these criteriaall personal finance decisions are about managing these four blocks so that assets are built with surpluses the sip is more important than the emi only for this reason it builds assets and enables those assets to grow in value over timethe aunt and the niece examples show where these blocks are under strain the niece needed a job as she did not have assets that generated income for someone to support her financially that household would have had to sacrifice its own asset building capabilities that would have been too much of an askthe daughterinlaws disdain for expenses and greed about the house also emanate from the need for assets her household can call its own she tries to draw upon entitlement to access the asset but the math is the samewhen we view our household finances just as we would view a balance sheet of a business we will focus on net worth or the value of assets we own over the loans we may still have to pay we would like the maximisation of this number as the primary financial goalif all we have is the human asset we would like it to earn an income that covers expenses and leaves a surplus to build financial assets the balance sheet becomes stronger when financial assets grow but the primary purpose of any asset is to generate income the household needs it cannot just sit there and be uselessnow consider your financial decisions with these building blocks in mind is that second house your bought with a huge emi really useful dont you need insurance so that the risk to human asset is well managed isnt it important to have a surplus in the bank after meeting all expenses shouldnt idle money be invested to grow in value isnt the emergency fund just the buffer you need when income is under riskpersonal finance is actually quite simple we tend to complicate it because we like to justify our money decisions post facto mostly we build assets that dont work for us we accept incomes that are inadequate we fail to control expenses being overconfident about the future and we do not know our net worth for the most part forget managing it activelythe aunt has leveraged the house to generate muchneeded income the niece has leveraged location to reduce expense and begin to save both have taken charge of their finances so they can manage their income and expense both have decided to protect and use the assets they own the levers are all in our hands alwaysthe