Do you ever think about what assets you have right now?
Maybe it comes up in conversation or your accountant asks you?
Maybe you’ve never really understood exactly what it means or have felt a little embarrassed to ask for a clear explanation (you’re not alone, by the way!).
When you understand what an asset is – and what kinds of assets there are – you can grow your wealth and invest in your future, whether you’re ready now or planning for a time when you will be ready.
So in today’s blog, we’re going to make it all crystal clear! You’ll discover:
- What an asset actually is;
- Examples of common assets;
- How to choose the right assets for you;
- And how to calculate your net worth (and why).
Let’s get straight in!
1. What actually IS an asset?
In a nutshell, assets are things you buy with your cash (earnings, savings etc) which over time will either grow in value or provide you with an income (or both).
Because as we all know, cash sitting in a bank account earns next to NO interest these days! Which means that thanks to inflation, your buying power decreases over time.
For short-term savings – like to pay for your tax bill, a big holiday or new car – saving your money is fine.
BUT to have something of value in the future, that’s where investing wisely in assets comes in.
And there is a massive (often overwhelming) choice of things out there!
Lots of us want to own our home. A property which gives you a beautiful place to be with your loved ones; the security of owning the bricks and mortar you live in and which will increase in value over time.
This is an asset. But remember the TRUE value of the asset is the bit of your house that isn’t mortgaged – your equity – which will increase over time, as your house price goes up and you repay your borrowing.
2. Besides your house – what are other common assets?
One of the most popular assets (for good reason) is investing in stocks and shares or collective funds, like those in a pension or investment ISA.
Over the long-term, their value tends to increase and some of them pay dividends you can take as income (often tax free) or re-invest for further growth (click here for more in my last blog, about getting started with investing!).
Rental property is perhaps the most common asset people think of. Providing good quality, safe housing for tenants can be really rewarding, as well as giving you semi-passive income and an asset which should increase in value over time.
Plus things like antiques, classic cars, wine, gold…or any other commodity that increases in value over time.
But the combination of these that will work best you totally depends on your plans for your future.
3. So HOW do you choose which assets are right for you? What will work best in your portfolio?
The key is to choose assets that fit with your lifestyle and your ambitions for the future!
If you want to be a digital nomad and work freely around the world, you might not want your money tied up in property where you can’t access it easily should your needs or plans change.
Whereas if you want the security of a dream family home, with alpacas in the garden (like we have here) – your view might be the total opposite.
I swear by a vision board to really focus on my goals, big or small. I am very scientifically minded but even I have been swayed by the power of a good vision board!
A vision board is a very clear visual representation of your hopes and dreams and I would really recommend creating yourself one, especially to help choose which assets you want to work to build.
If you find you have lots of pictures representing freedom – maybe with scenic views of places you’d love to travel to, at the drop of a hat – property may not be for you.
And equally if, like me, your board evokes feelings of stability and security – with beautiful houses and gardens – then property could be the way to go!
If you already have a decent sized pension pot, you might want to consider Stocks and Shares ISAs so that you’re not creating any more taxable income than you have to (remember: income from an ISA is tax free).
And if you invest in writing a book or creating other intellectual property, you may be able to create an asset that you can sell and/or have a way of drawing income from your business for many years into the future.
So growing your assets simply means growing the wealth you keep hold of, rather than simply increasing the amount you earn.
Because let’s face it…if you earn £100k a year, in 10 years’ time you’ll want something to show for that £MILLION you earned!
There’s a well-known saying that ‘what you focus on will increase’.
And it’s never more true, than when it comes to money. But wealth isn’t just about how much money you earn. There’s SO much more to it than that.
4. How (and why) to figure out your net worth!
A great starting point is to understand your net worth, which is a measure of the money and assets you currently have.
By keeping track of your net worth over time, you can check that you are building assets and accumulating some degree of wealth, instead of just making money.
If you take the value of the assets you own minus any money you owe (mortgages, car finance, credit cards and so on), the figure you have left is your NET WORTH.
Which is the thing you need to look at growing!
There’s no point earning more if you just spend more on stuff.
But earning more and organising your money (so you pay less tax and have more surplus each month) will free up money to invest in growing your assets.
I encourage my clients to put their assets and liabilities in a spreadsheet and then update the figures each month (or quarterly), so that they can track their increasing wealth.
You can choose to do this as your own personal assets or as a joint household – but I’m extremely passionate about women have assets in their own name and growing their own wealth.
Because this gives you security and means that at a time in the future, when you choose to work less hard (we’re not even going to call it retirement), you have ways to supplement your income.
And you get to have the standard of living you want right now too, to have fun with your money and live the life that you really want.
So when I say assets – what I really mean is LASTING WEALTH. Maybe I’ll start using that from now on!
If you’d love to start building assets yourself and significantly increasing your net worth – but it still feels a little overwhelming and you want to make sure you get it right from the start…
That’s where my signature Wealth Builder Experience comes in! It’s a high-level 1:1 experience, working together to create your Wealth Plan and then implement it step by step, over 6 months together.
We start with an intensive day together – to organise your financial foundations (wherever you’re starting from!); get a clear picture of what you want and map out your bespoke Wealth Plan.
You’ll know the EXACT next steps to take (like how to set up your Stocks and Shares ISA), before we then meet again on Zoom one month later and again at the end of month 3, to keep implementing each next piece of your plan.
You’ll get total support from me throughout, for any questions or anything that comes up.
And then we’ll celebrate your Wealth Plan being in place and working for you, with a beautiful lunch together at the end of our 6 months!
So if that sounds interesting – just click here to message me and I can fill you in more about how it all works.
Here’s to building all the lasting wealth and the future life you dream of…starting today!
Until next time,
Claire