There’s been some confusion over the years when it comes to the asset definition. An asset can help you make you money and a liability can drain your bank account. Some people think an asset is the most expensive thing someone owns, while others believe that an asset needs to earn you money for it to be called as such. In this article, we’ll break down the asset definition by describing what is an asset. We’ll also share some examples of assets and types of assets, and we’ll teach you how to acquire assets without money.
What Is An Asset?
An asset is something that a person or a business owns that has a long-term economic value, or in other words, makes you money or appreciates in value.
Historically, many have considered their house an asset. This belief came into place because it’s regarded as the most expensive thing that the average person owns. However, the reality is that most people don’t fully own their homes. Instead, they’re locked into a 30-year mortgage with interest tacked on. And yes, I’m one of these people locked in a mortgage too. While a house can be an asset, the mortgage on the home is what makes this a liability instead. For a house to be an asset, you would need to have a renter pay down the mortgage. In this case, the renter is paying down the liability. You may also make an extra $100 or so a month, which can be considered passive income. Thus, this strategy of renting out your property can turn a liability, which costs you money, such as a mortgage, into an asset.
Examples of Assets
To break down examples of assets, let’s first separate the list between personal assets and business assets.
A personal asset is something you own that appreciates in value over time. A few examples of personal assets are:
- Designer clothing
- Sporting equipment
- A mortgage-free house
- Savings account
- Retirement savings plan
- Investment portfolio
- Musical instruments
In some cases, accountants will consider assets as things of value that you own. A few examples of other personal assets may include:
A business asset is something a business owns that appreciates in value, makes money, or is something you can add to a balance sheet. Here are a few examples of business assets:
- Real Estate (land, buildings)
- Electronics (software and hardware too)
- Prepaid expenses
Types of Assets
There are five types of assets: tangible assets, intangible assets, financial assets, fixed assets, and current assets. Here’s a brief breakdown of each one.
1. Tangible Assets
Tangible assets are items you physically own such as cash, property, machinery, artwork, or antiques. These items are measurable and are used in people's or a business’ everyday life. These items have a monetary cap on their value.
2. Intangible Assets
Intangible assets are items that lack a physical presence such as a business’ brand, patents, brand recognition, trademarks, copyrights, or licenses. While these items have a monetary value, it’s harder to measure than something more tangible. It can play a role in measuring a business’ valuation but they aren’t liquid.
3. Financial Assets
Financial assets are assets that are liquid and based on contracts. Examples include: cash, stocks, dividends, bonds, derivatives, mutual funds, or bank deposits. They don’t have a physical form but possess a monetary value.
4. Fixed Assets
Fixed assets are measurable assets that aren’t easily converted into cash. For example, land, houses, equipment, and buildings.
5. Current Assets
Current assets are assets that are expected to become cash within a year such as businesses being sold, stocks, product inventory, and liquid assets.
5 Best Income-Generating Assets
If you’re looking to acquire assets, buying a website can be a great investment. Here on Exchange, you can buy and sell ecommerce websites. Some websites include assets mentioned on this list, such as inventory that you can sell for a profit. You can browse the collection of websites for sale and find the one best suited for your lifestyle and skillset. You’ll find everything from dropshipping websites to print on demand businesses to subscription box businesses and then some. If you’ve always wanted to start an online business, investing in ecommerce websites can be a fun way to build your asset that’ll make you passive income. Check out some of these website ideas if you’re still trying to decide what type of website to create.
2. Dividend-Paying Stocks
Dividend-paying stocks can also be a great income-generating asset that you can own. The benefit here is that you can keep your stocks in the market as they continue appreciating in value but still earn some income through the dividends. Investing in stocks can be a bit risky as there are market crashes every few years. Sometimes there are multiple stock market crashes within the same week as we’ve seen recently. However, you only lose money if you withdraw stocks when the price drops. Some investors recommend reading annual reports from the businesses you invest in from the last page to the first page, to help you determine whether or not the stock is a buy or a sell as the beginning is always filled with the positive aspects of a business.
3. Rental Properties
Rental properties can be a great asset to own. Keep in mind that house prices don’t always go up in value, so you’ll want to work with a real estate agent to help you find the best investment properties. With a rental property, you only need enough to pay for a down payment to purchase the property. After that, a tenant pays down the property as he or she will be living in it. Some landlords make at an extra hundred dollars or so a month that can be reinvested into the property or saved as a source of income. Some real estate investors choose to buy multiple properties to help elevate their earnings. Keep in mind that this strategy isn’t effective everywhere, as real estate, can be expensive in certain cities or not a viable option in others. Remember to work with an industry expert to help you find the best deal to build real estate assets.
4. Savings Account
If you’re interested in building an asset, however, are currently starting from zero, you may choose to start with a savings account. Your savings account can become an asset as it’s a clear example of money making money. Every time you make money put as little as ten percent of your earnings into a savings account. Do your research as some accounts may have better interest rates than others. For example, in Canada, the Tax-Free Savings Account allows you to earn money from capital gains and interest without being taxed on it. Shop around to find the best interest rates or financial benefits for savings accounts.
Businesses can be great income-generating assets as well. If you run an online store, your business might have assets as well. For example, the inventory you own is an income-generating asset. And your business and brand are assets too. With your business, you can sell physical or digital products or even services to earn additional income. By growing your business’ authority online, you can create something that appreciates in value over time. And when you’re ready to retire or work on something new, you can sell your business to someone else.
How to Acquire Assets When You Have No Money
With many people struggling financially right now, you might be thinking to yourself, “I don’t have money to acquire an asset.” But even in the toughest economic times, there’s always a way to acquire assets when you have no money. So, we’re going to share a few ideas on how you can do that.
1. Build An Online Store
Shopify is the platform where you can create your online store. You can access free themes, stock photos, and courses too.
Now, you might be thinking to yourself, “Well, that’s great. But I can’t afford to buy product inventory.” Well, fortunately, Shopify owns a brand called Oberlo that allows you to find products and sell them without buying inventory. It’s a process known as dropshipping. And they have a forever free account that will enable you to add products to your store without paying for a monthly subscription.
Then, over the next few months, you’ll need to focus on free marketing strategies to help you generate sales. The most effective strategy is content creation. You can create videos for social media about the product. You could create social media posts. Blog posts are one of the most effective long term strategies too. You can write SEO-optimized blog posts about your niche, or in other words, industry, and post links to the blog post on Pinterest to help you get traffic to the article for free. The more content you produce, the more likely that you’ll grow your organic traffic. Thus, increasing your website’s value.
2. Trade Assets
Many people own something of value. Maybe you have an expensive piece of jewelry you never wear, own a rare guitar that’s collecting dust in your storage, or have an Airbnb rental property that’s currently empty.
You could trade these assets for something of appreciating value. If you know someone who has an asset that you’d like to own, you can offer them an asset you own in a trade deal. You can negotiate with people who are selling something of appreciating value.
Or you can sell these assets to help you stay afloat during this difficult time. However, if you do earn money, aim to save at least half of what you make to invest in another asset so you can still own things of economic value or appreciating value.
3. Buy Assets With Assets
In Rich Dad Poor Dad, Robert Kiyosaki shares his strategy for how he buys assets with assets– in some cases, without using his own money. In one scenario, he asked a friend to loan him $2,000 and offered to pay $200 of interest so he could buy a property. He purchased the property for $20,000 at a bankruptcy attorney’s office. Since the home was actually valued at $75,000, he decided to set a price of $60,000 to entice bidders. When he sold the house, he asked for a $2,500 processing fee, which the buyers paid for and was able to pay the loan with interest to his friend without using his own money. The house sold for $60,000, which net him a $40,000 profit. And he did it without using his own money.
Now that you know what is an asset and how to create ones that’ll make you money, you can start off to build out your own. Owning something that’ll appreciate in value over time or will make you money is a great way to create financial stability in an unstable world. With so much economic uncertainty in today’s world, there’s never been a better time to start building an asset of your own. The financial investment doesn’t always start big. In most cases, people start with a couple of hundred dollars and reinvest the money until it becomes greater than they ever could have imagined. Whether you start with a savings account, your first online store, or by buying stocks when priced low, you’re on the right track to building an asset that’ll help protect you financially in the long run.
Which type of assets are you looking to build today? Let us know in the comments below!