Did you know that money can be a trusted ally, helping you to build wealth, or an enemy that is committed to destroying your finances? It can make life easier, or make your life miserable. It can draw husband and wife closer together, or blow them apart (see our previous email, 3 Steps to a Powerful Money Meeting).
Wealthy people learn to define assets differently than the rest of the world. Wealthy people want money to work FOR them, not AGAINST them. Normally, we define an asset as “something you own”. So, your house is an asset. A car is an asset. Your personal items such as furniture, electronic devices, and clothing are assets.
Not so fast!
Many wealthy people better define an asset as “something that adds value to your finances”. In other words, it either increases in value or earns interest. In other words, it is making money FOR you. This definition changes our perspective, doesn’t it? For example, would a car be an asset? Does a car increase in value or decrease in value? Does it earn interest, or does it cost you money regularly due to taxes, insurance, and maintenance? Clearly by this alternate definition, a car is NOT an asset. Even if you paid cash for it, it behaves more like a liability, not an asset. I’m not saying you should live without a car, but don’t mistakenly count it as an asset that is a “friend”. It won’t help you build wealth.
Other assets might include a home, savings accounts that earn interest, investments that increase in value over time, rental property, etc. Having money in these “true” assets is like gaining an entirely extra source of income. Your money is earning more money, not costing you money. To be outstanding with money, we must learn to embrace assets that actually increase in value and limit those that actually cost us over time.