Want to Build on your Financial Freedom? Buy Assets

By Marshall Goins

People working on their baby steps to becoming a millionaire often ask me, what else can I do to build my wealth generating systems?

My reply is always this:

Buy assets. 

This is a simple concept, however, many people don’t understand the significance of doing this. It starts with an understanding of the difference between an asset and a liability. 

An asset is something that you own that has value, (like cash, property, or investments). 

A liability, on the other hand, is something you owe, (like a loan or a mortgage). 

Essentially, assets add to your wealth, while liabilities take away from it.

A simple way to think about this is, an asset puts money in your pocket and a liability takes money out of your pocket.

Here’s a quick test. Tell me if these things are assets or liabilities:

• A new car

• A new house

• An apartment building

• Gold

• Silver

• A new couch

• New designer purse

• A classic car

• Credit card rewards

• Timeshares

• Tesla stock

• S&P 500 index fund

Buying assets is important for both individuals and businesses for a variety of reasons.

For Individuals, you buy assets to:

• Building wealth: Assets like stocks, bonds, real estate and businesses can appreciate in value over time, increasing your net worth.

• Generating income: Some assets, like rental properties or dividend-paying stocks, can provide a steady stream of income. There are many other ways to buy assets that generate income. 

• Build financial security: Assets can provide a safety net in case of unexpected expenses or job loss.

• Prepare for retirement planning: Investing in assets is a crucial part of preparing for retirement.

• Leaving a legacy: Assets can be passed onto future generations.

For Businesses, you buy assets to:

• Generating revenue: Assets like machinery, equipment, and intellectual property are essential for producing goods and services and generating revenue.

• Business growth: Investing in assets can help businesses expand their operations and increase their profitability.

• Securing credit: Owning valuable assets makes it easier for businesses to obtain loans and lines of credit.

• Increasing company value: A company with a strong portfolio of assets is more attractive to investors and potential buyers.

• Competitive advantage: Unique assets, like patents or proprietary technology, can give a business a competitive edge.

From the accounting perspective, there are a few types of assets:

• Tangible assets: These are physical assets that you can touch, such as real estate, vehicles, and equipment.

• Intangible assets: These are non-physical assets, such as patents, trademarks, and copyrights.

• Financial assets: These include stocks, bonds, and cash.

(For the purposes of this article, we are only talking about financial assets). 

Here are the results of the test you took above: 

• A new car: Not an asset because it depreciates so fast and expenses are high

• A new house: this is debatable. It is definitely an asset of the bank, if you have a mortgage. If the house is paid for with no mortgage, it is an asset. If you buy are new house and rent it to someone else for a profit, it is definitely an asset.  

• An apartment building: yes, no question. This is an asset.

• Gold: yes

• Silver: yes

• A new couch: Not an asset

• New designer purse: Not an asset

• A classic car: Collectibles of all types are assets. 

• Credit card rewards: not an asset

• Timeshares: not an asset. 

• Tesla stock: yes, an asset

• S&P 500 index fund: yes, an asset

How did you do? Have any questions? Feel free to contact us today.

In conclusion, buying assets is a crucial step in building wealth, achieving financial security, and growing a business. By carefully considering your investment goals, risk tolerance, and other factors, you can make informed decisions about which assets are right for you.