What term is used for a person's financial obligations, which include both long-term and short-term debts?

The term used to describe a person's financial obligations, which encompass both long-term and short-term debts, is liabilities. Liabilities represent all outstanding debts and financial responsibilities that a person or organization must pay in the future, such as mortgages, loans, credit card debt, and other financial commitments.

In the context of personal finance, understanding liabilities is crucial as they play a significant role in determining an individual's net worth, which is calculated by subtracting total liabilities from total assets. It's also essential for lenders to evaluate borrowed amounts compared to income and assets when assessing creditworthiness.

Assets, on the other hand, refer to resources owned by a person or organization that have economic value, such as cash, real estate, and investments. Equity represents the ownership value in an asset after all liabilities have been deducted, while income is the money received, often on a regular basis, for work or investments. Understanding these distinctions is essential for effective financial management and mortgage loan assessments.