What Is “Asset Rich” And How Can I Achieve It?

You might be in a very wealthy or well-off position regarding how much cash you have in the bank. This may result from working for 50 years straight, building up a nice pension, or maybe you even won the lottery and have a chunk of cash you are itching to spend.

Financial advice you should start following now is to build up your asset portfolio. The key to long-term wealth is to have your money work for you, not you work for it. 

By this, we mean if you are looking to spend the money you have earnt on something, make sure it is a lucrative investment that can increase in value over time.

What do we mean by this exactly? As you should be aware, the currency and exchange rates of money constantly fluctuate due to economic and generic world events that are technically out of our hands. 

If you look at the great British pound in recent times, for example, the value of the pound is at an all-time low, meaning across the globe, the Brits are not reaping the benefits of their cash being worth more.

Due to these factors and from what we can see from the wealthiest people in the world, it is important to store your money into assets. 

Assets, of course, still have liabilities out of investors' hands that fluctuate their value. Still, more often than not, it is easier to manipulate your end take-out value exceeding your initial investment when you cash in. 

Investors in assets see a higher return on their investment, which they then can enjoy the money made and continue to reinvest the capital asset.

What Is Classed As Assets?

Assets can be good, liabilities, or neutral. Good assets are investments in real estate, rental properties, crowdfunding projects, bonds, and businesses. 

What makes them more reliable and lucrative is their adaptability to all economic conditions. If invested in the correct way you can see capital appreciation in all economic climates as long as you are making the correct decision or using a facial advisor to do it for you.

 

You should view your financial advisors like you do your life insurance broker, they are both important for long-lasting wealth and keeping the money you have. Just ensure if you are searching for a financial advisor that they are fully compliant and regulated.

Neutral assets can be appreciated assets such as your home, gold, artwork, and antiques. The reason why they can be deemed as neutral is that it can't be certain whether the appreciation of their value will exceed the cost of upkeep as inflation comes and goes.

Liabilities are assets such as your TV, home furniture, car, and mobile phone. Although some may argue they are essential to everyday life which in some cases they are, you never see a return on investment. 

The reason for this is they simply just lose value as time goes on and can cost you more and more the longer you have the asset with maintenance. 

Do not be discouraged if you only have liabilities at the moment, they are a luxury but many asset-rich people start with more liabilities than assets.

What Does The Saying “Asset Rich, Cash Poor” Mean?

When it comes to being “asset rich”, you may have heard the saying “asset rich, cash poor”. This saying means that you have locked most of your wealth into assets, such as real estate, which may be hard to convert into cash when needed. 

Ideally, you want to create a balanced portfolio of assets and it’s important to remember that both assets and cash can be good, quality assessments. In an ideal world, you should have cash in the bank and strong assets that are likely to appreciate in value over time.

Being asset rich and cash poor doesn’t mean that you’re broke. This only means that you have tied most of your wealth into assets, such as real estate and property, which can be hard to convert into cash. 

Just because an asset may be expensive doesn’t mean it’s a strong asset to keep hold of. For example, cars can be costly in the short term, but they depreciate fairly quickly. Stronger assets, such as real estate, will likely value over time.

Final tips

Now you have a better understanding of assets and liabilities, you should start small and figure out in what form you are going to gain your first assets. Enjoy an early retirement living off of your investments and start building generational wealth today!

7 Steps to Wealth

The bills are piling up. You keep trying to save money, but every time you get a little nest egg going, something happens (a car repair, a broken appliance, etc.) to wipe it out. And to top it off, your employer has hinted at layoffs.

When times are tough financially, it can be difficult to even think about amassing wealth. You’re so busy trying to keep your head above water and pay off your debts that a life with a seven-figure bank balance may seem like nothing more than a pipe dream.

While almost no one becomes a millionaire overnight — and no, playing the lottery is not a legitimate wealth strategy — it is possible to rise above your circumstances and attain considerable wealth. All you need is a strong commitment to achieving your goals and some knowledge of the proper steps involved. 

1. Develop a Written Financial Plan

The first step to achieving any goal is to develop a plan. You wouldn’t try to drive to a destination in an unfamiliar city without a map or GPS, so why would you try to make it to a major “life destination” like considerable wealth without similar navigational tools? Regardless of whether you’re at the beginning of your career and earning an entry-level salary or already have some experience and the paychecks to prove it, you can change course and get on track to wealth. Meet with an experienced financial adviser and get professional advice and feedback on how you can meet your goals — and then act on those plans.

2. Eliminate Debt

As long as you are paying a significant portion of your income to someone else, you will struggle on the path to wealth. Live below your means, and never charge anything you can’t pay off in a month or two; some advisers suggest never charging anything you consume, including clothing, as you’ll be paying interest on it long after it’s outlived its usefulness. If you must finance a home or car (which most people do), don’t max out your budget. Choose the loan terms that allow you to eliminate the debt as soon as possible.

3. Make Your Money Work for You

One reason the wealthiest people are so well-off is they make their money work for them. Even if you invest a modest amount of money in the stock market, you can expect to earn a rate of return of around eight percent annually. As your investments grow, so will the amount of money you make. 

4. Start a Business

According to one study, almost three-quarters of all American millionaires are entrepreneurs. While it is possible to build wealth working for someone else, you are far likelier to have success when you are your boss.

5. Change Your Mindset

Many Americans, even those with steady incomes, operate under a “poverty mindset” in which they fear they could lose everything at any moment, so they must hold on to every penny they get. Or, they feel they will never attain the highest levels of financial wealth, so why even bother? They become complacent, and while they may be comfortable, they are never going to be wealthy. If you want to be wealthy, you have to think wealthy, and emulate the thoughts and actions of those people who have reached the upper echelons of wealth. 

6. Create Multiple Income Streams

Few millionaires have made all of their money from one income source. Most have income from multiple streams. When you’re earning money from multiple sources, you don’t have to panic when one dries up and you can better leverage your resources to keep the money coming. 

7. Save Money

The best way to amass wealth is to save money. An emergency fund is a must, should things go awry, but you should also find ways to save money wherever you can. The wealthiest people are not generally spendthrifts; while it’s easy to imagine them dropping thousands of dollars on shopping sprees and parties, most are far more careful with their money. As money comes in, make saving a priority. As your income increases, so should the amount that you are saving.

Becoming a millionaire takes hard work, perseverance and a focus on the goal at hand: a healthy bank balance. By changing your approach to money and taking cues from those who have already achieved that level of wealth, you can write your ticket into the “millionaires’ club.”

About the Author: Isabelle Fontaine holds a marketing degree and has started several successful businesses in the course of her career.