The best way to get rich and stay rich is never to lose money. Unfortunately, between the rising price of goods and inflation, that’s easier said than done. To get rich, you need more than just money–you need assets. Here’s everything you need to know about how to build your assets and get rich over time.
What are assets?
An asset is any piece of property that has monetary value. It can be anything from a car, phone, to even your intellectual property. If you own something and it’s worth money, it’s considered an asset.
However, not all assets are the same. Here’s a breakdown of how certain assets are different:
Financial assets
Financial assets represent ownership or future ownership of a certain item. These are assets that can be easily converted to cash. Aside from cash, these are not physical items and usually require a certificate or receipt to prove ownership.
One of the most prominent examples of a financial asset is a stock. These are a small portion of a company that anyone can publicly trade and own. When you buy a stock, you’re actually buying a part of that company. The value of the stock will then change over time depending on how well the business is being run.
Some other examples of financial assets include:
- Cash or cash equivalents
- Bonds
- Retirement accounts
You can check out my article here for more information about different financial assets.
Tangible assets
Tangible assets are assets that you can physically touch and hold. These can be anything from everyday items, like your phone and laptop, to your car. Some other examples of tangible assets include:
- Real estate
- Jewelry
- Gold and other precious metals
- Paintings
- Collectibles
Intangible assets
These assets are properties that can’t be touched or held but are still owned. Unlike financial assets, they’re not always easily exchanged for cash. Some examples of intangible assets include:
- Intellectual property rights
- Copyrights for written work
- Patents and trademarks
Tips to build assets
You need to build your assets because owning them is your key to wealth. The more valuable assets you have, the more you’re worth. Here are 12 tips on how to build your assets:
Build your emergency fund first
Before you build assets by investing in different things, you need to keep yourself covered for a rainy day. An emergency fund is a savings fund that saves you if you need cash fast.
An emergency fund can be as large or as low as you feel comfortable with. For most people, saving at least six months’ worth of expenses is recommended. For reference, the average American’s expenses per month are about $5,500.
Eliminate debt
Even if it’s better to invest earlier, you generally don’t want to invest if you’re in debt. Instead, you may want to focus on paying off that debt first. Certain debts, like student loans and credit card debt, have higher interest rates. This means the longer you leave them unpaid, the more money you lose over time.
Additionally, by eliminating debt before investing, you’re freeing up even more money for yourself to invest.
Grow your income
While you don’t need to spend money to make money, having a higher income does help. When you have more income, you can invest even more money into assets. Doing this will help you multiply your money over time. Whether it’s by getting a raise or starting a side hustle, you’re only helping yourself by growing your income.
Make long-term investments…
One of multibillionaire Warren Buffett’s investing strategies is to focus on quality stocks. While they don’t make huge jumps in value, these stocks have become more and more valuable over the years. Quality, long-term stock investments are the closest you can get to guaranteed money.
Likewise, when you build assets, you can’t go wrong with safe investments that will earn you money over time. It just takes a bit of patience!
…But don’t sleep on the short-term
If you’ve got the time, you might also want to study the market and make short-term investments. Risky investments into volatile assets are one of the fastest and least safe ways to make money. Just look at the number of cryptocurrency success stories!
However, as easy as it is to earn money from volatile assets, it’s also easy to lose money. Gambling your emergency fund on a stock and hoping it goes green is a dangerous investing strategy. Instead, balance your portfolio with a mix of long and short-term investments.
Some assets can protect your wealth…
Certain assets, like cash, will depreciate over time due to inflation. This means that as time goes on, their value will be lower. Just look at how much a dollar in 1950 would be worth today!
To protect your wealth, you need to find a hedge against inflation. One of the most popular assets for this is gold, which is finite and doesn’t decrease in value over time. While it can go higher or lower in the short term, its value will remain relatively the same over decades.
…While others can be used to grow it
Financial assets are mainly used to grow your wealth. By buying various stocks, funds, bonds, and other assets, you’re helping your money grow over time. When you build assets, you want to diversify them to both protect and grow your money.
Invest as soon as you can
The sooner you invest, the better. This is because of compound interest, or interest upon interest. By investing your money sooner, you’re giving it more time to appreciate and become even more valuable.
Real estate is king
If you have investment capital, land is one of the most valuable assets to own. It appreciates incredibly fast and is almost always in demand. This makes real estate one of the best, if not the best, assets to build.
Invest in yourself
The most important asset you have is yourself. Even if all of your investments depreciate, you’ll still be able to earn money with your skills. Investing in yourself means spending money on learning new skills and staying healthy.
One of the best ways to learn new skills is to read resources like books. Here are my picks for some of the best books to build your money mindset.
Don’t invest money you’re not prepared to lose
Some people compare investing to gambling, and these comparisons aren’t entirely unfounded. There is no guarantee that you’ll earn money back from your investments. Even if you think the company will last for years, there’s always the possibility of them closing at any moment. Because of this, only invest money that you’re okay with losing.
Keep learning
The financial world is always changing, and there’s never a “best” way to build assets.
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