In personal finance, assets are items we own that generates money for us.
Is your house under mortgage an asset? Sure it’s an asset, but for individual owners, No. It is an asset for the bank since they generate money from it. But for us individuals, it’s a liability. We spend money on it. Even after mortgage payments, we still spend to improve or renovate it.
Is your car an asset? It can be an asset if this is used to generate income. You may use it to service other people, deliver items you sell or lease it.
Assets can be classified into 3 categories:
Liquid Assets are items that can easily be converted into money when we need it. This includes cash in savings, checking, and virtual wallets.
Large Assets are items that are of huge value such as houses, cars, beach resorts that we can lease.
Investments is when we allocate our money to generate income. Investments usually change value so it will be better to record them at their current market value.
Cash is literally the money that we hold in our wallets and savings banks. They only generate more money if they are in bank accounts that generate interest income. Each bank will have its own terms and conditions to earn interests. If you want to earn from this, choose the bank with the highest interest rate.
Accounts Receivable is what other people owe you most likely to relatives and friends. This is the riskiest in personal finance as we may not get back our money and lose friends in the process. Although it can generate more income through higher interest. If you want to earn from this, you may want to read more on P2P lending.
Most individuals dream of having their own business as it is the most lucrative form of income. However, it is also the most risky. In order to succeed with business, you need to have both the money and the skills to run a business. As their businesses grow, businessmen always read or find mentors to increase their skills and capacity to run bigger businesses. If you want to earn from this, you may want to read more on business books.
Real Estate Properties and Equipments
Real Estate Properties and Equipments are high value items that can normally generate periodic income when leased out. If you want to earn from this, be sure to ready huge amount of money and do thorough research before committing.
Investments are money allocated to other money generating portfolio such as stocks, bonds, mutual funds, and certificate of deposits. They can produce higher returns on your money, but usually comes with higher risks. It is best to do thorough research on where and when to invest. To earn from this, it will be best to have more money ready but recent markets enable us to start with smaller capital.
Intellectual Properties are items you own because you invented or innovate something to improve the lives of everyone. This is an incentive for everyone to invent and protect us from copycat. You can earn with this through royalty income from franchising or licensing deals.