5 Ways Assets Help You

• Assets are anything you own of value that can be sold.
• Some assets are more flexible than others.
• Accumulating assets allows you to live the life you want now and in the future.

If you’ve listened to any financial advice you’ve probably heard them talk about the importance of accumulating assets. The problem is, no one seems to take the time to define an asset. So, to keep things simple, assets are anything of value that you own that can be sold.

It should go without saying that the more assets you have the better off you are. We are not saying that money buys you happiness, but there are undeniable benefits to accumulating assets that will help you lead your best life.

Now, are assets really anything that you own that can be sold? Like, is the pair of headphones you have listed on Facebook Marketplace an asset? Technically, yes that is an asset, but if you want the ultimate benefit of accumulating assets, having a closet full of headphones to sell is not the best route. So let’s look at what we usually mean by assets.

What Are Some Examples of Assets?

Savings Accounts

There is no asset so real as cash. It is the easiest to transfer and use, and it is the easiest to value. So, the first kind of asset is simply how much cash you have on hand. If the answer is basically zero, now is the time to reconsider how you can change that.

A savings account means several different things. Cash assets are funds held in cash under your mattress (which we don’t recommend) and funds held at your bank. It can take the form of a regular use account, a savings fund, an emergency fund, a sinking fund, or any other store of cash you have. Having cash means you have readily available assets.

Investment and Retirement Accounts

Next, you have investment accounts, which include retirement accounts, taxable brokerage accounts, and permanent life insurance policies with a cash value. Investment accounts are less liquid than cash, meaning you can’t use them as quickly as you can use cash, but they are a rather flexible way to grow your assets over the long term. An investment account is any account where you put money and expect it to grow over the long term.

Investment accounts usually invest in stocks and bonds, but REITs (Real Estate Investment Trusts), crowdfunding, and cryptocurrency are on the rise. The types of accounts that are usually considered investment accounts are taxable brokerage accounts, retirement accounts such as the 401k, 403b, or the IRA, investments with crowdfunding tech companies, and cryptocurrency exchanges. Putting money into these accounts puts your money at risk of loss, but over the long term, if invested well, your assets should grow allowing you greater flexibility.

Recommended Reading: Investing 101: Real Estate, Stocks, and Bonds

Your House and Real Estate

Your home and other pieces of real estate that you own are also valuable assets, but only when they can be sold for more than you owe. Also, it is important to keep in mind that because a mortgage pulls money out of your pocket reliably every month, it reduces your financial flexibility. That means it is important to have other liquid assets or income to offset this financial burden to get the long-term benefits of owning real estate. 

The long-term benefits of homeownership and real estate, however, are immense. Over time you get the benefits of loan paydown and appreciation on your home. In other words, the money in your pocket when you sell increases dramatically. There are also great tax benefits to owning a home and other types of real estate. Ask your tax professional about how this can help you.

Recommended Reading: How to Invest in Real Estate for $1,000 or Less

Other Valuable Items you can Sell

Assets can be almost anything. If it can be sold it can be an asset. Of course, you need to be careful with this. Your car is an asset, but it is also a quickly depreciating asset, so the resale value drops every year. Artwork is an asset, but there is no guarantee the artwork will increase in value and it is expensive. Collectible items like Beanie Babies were an asset worth thousands of dollars…until they weren’t, but other collectibles are valuable. Owning valuable items you can sell is great, but just be careful not to put all of your financial eggs in this one basket.

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5 Ways Assets Help You

So now that we understand what assets are, the question is, why do they matter? Here are five ways that assets help you.

1 Cover Emergencies

The first way that assets help you is to cover emergencies. When you have to get an emergency appendix removal on a high-deductible insurance plan, you need to come up with some cash pretty quickly. Having assets to draw on makes this easier.

Usually, the first line of defense is an emergency fund, but you can also draw on other accounts you have and even sell valuable items if needed to pay for an emergency. Having the funds on hand to pay for an emergency instead of going into debt will benefit your financial and mental well-being going forward.

2 Live Off Them Later

By growing assets now, you are making it possible for you to have a comfortable retirement. To make an obvious statement, Social Security is not enough. You will want to have more than that meager existence when you retire, so it is vital to put aside more now. If you are mindful of your assets you’ll be able to retire with more than enough to enjoy the decades of your life after retirement.

3 Live Off Them Now

But what if you don’t make it all the way to traditional retirement? With enough assets set aside, you can live off of them right now. Early retirement sounds like a pipe dream to many people, but if you look into the basic math behind it, it is actually quite simple. More practically, if you have assets set aside, you can handle any short-term storm such as a surprise layoff or disability without worrying about where your next meal or rent payment will come from.

4 Pass Them Down

If you don’t use all of your assets in this life you can pass them down. This can be giving your assets to your children to give them a leg up in life or giving them to charity. Growing your assets now, therefore, doesn’t have to be a greedy money grab but a means to help others.

5 Enjoy Live

Lastly, when you have more money in your pocket, you don’t have to worry about unemployment, paying your rent, or covering medical bills. You can enjoy life more, such as going on vacation debt free or spending your time on passion projects instead of a mundane job. These tangible benefits of accumulating assets make all the difference.

The Money Wrap Up

To put this whole article into one sentence, assets give you options. The more assets you have the more flexibility and freedom you have to make your own decisions and control your own life. You can handle anything life throws at you and overcome it with ease. Owning assets is financial freedom.

Which way that assets help you are you most excited about? Comment Below.

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