What is an Asset?

What is an asset?

I think it is interesting that in my own life, this word has had many different meanings to me.  When I was 10-12, an asset was the baseball card or comic book that I collected.   I was going to keep them until I got older and sell them to make myself rich.  Going into and out of college, an asset was the job that I was going to get.  Then in my years just out of college, I thought a house that I owned was an asset.

Now, I don’t think that any of those are assets.  The reason I think this is based on my newest definition of “asset.”  To borrow from Robert Kiyosaki, an asset puts money in your pocket regularly, whether or not you are doing something with it.  Those comics that I coveted (and still have), have only taken money out of my pocket.  (Honestly, at this point the sentimental value is so high that I wouldn’t want to sell them anyway.)

My job does put money in my pocket, but it requires me to work on it.  If I stop going to my job, the money stops automatically.  That is not an asset.  That is a job.  Owning my own home does not put money in my pocket.  In fact, it takes money out of it each month for my mortgage payment, bills, insurance and any random thing that needs to be fixed.

My house could become an asset once I sell it.  But until that day it is most definitely a liability.  To add to that, I do not even know if my house is going to be an asset once I sell it.  The past few years have shown that it is pretty easy to be upside down on a mortgage if you are not paying attention.  So when I sell my house, it could very well end up being an even bigger liability.

So what is an asset?

Real estate can be an asset.  You could have real estate as a rental property.  Again, I must point out that it is only an asset if it makes you money each month.  If you need to pay even $25 each month just to keep the rental property going, it is a liability.  Real estate could be an asset if you buy a property, fix it up and sell it.  But it is only an asset after you have sold it, and only if you sell it for more than you have invested in it.

Businesses can be an asset.  If you learn how to run a business so that it stays in the black, it is most definitely an asset.  But many people throughout history have also found that businesses can be a huge liability as well.  To be honest, only one of the businesses I have tried has actually generated any revenue.  All the rest have been liabilities.  Luckily, I view them as paying for an education.  The education of how not to run a business so that I can better learn how to run a business.

Stocks, bonds, mutual funds, commodities, futures and much more of the like can also be an asset.  As before, this one has a but too.  If you do not know what you are doing, these can all lose you money.  Either by the price of the stock, bond, mutual fund etc. going down; or by paying excessive fees to the point where you end up paying more in fees than you earned in profit.

So this leads to the best asset of all: thinking.  Learning about how to invest in real estate, how to run a business and how the stock market/commodities markets work is the best asset of all.  Thinking about your financial position now, the financial position you want to be in and how to bridge that gap is how every financially successful person in the world has become financially successful.

So go out there and find out what interests you.  I have been studying entrepreneurial endeavors for three years now.  Amber and I have been studying real estate for only about six months now.  We know where we want to be and we are learning how to get there.

How will you get there?