Understanding Your Assets
Managing your money is tough – there are tons of things to consider, from savings account interest rates to stocks, retirement funds, and tax-free government programs. And while money alone is complicated enough, your total worth includes so much more! Your assets – the most expensive things you own – are a key part of your overall worth, and financially savvy people understand this. That’s why your biggest purchases should be considered investments, from the moment you make them to the moment you part with them.
Your house is an investment
When you pay rent on a property, you get the privilege of living there – and that’s it. But home ownership is different: you’ll take out a loan and pay a bit of it off (with interest) every month, meaning that your monthly payments are giving you more than just the right to live in your space: they’re also slowly helping you secure complete ownership of the space itself. After decades of renting the same spot, you can move out with nothing more to show for it than the memories; but after decades of paying a mortgage, you can move out and sell your home for a fair price, effectively converting your asset into cash.
The real estate market is a complex thing, and most of us can’t buy and sell houses as easily as we buy and sell stocks, but that doesn’t mean that your house isn’t an investment. It won’t be as a liquid or (hopefully) as volatile as some stocks, but with a little luck and some research, before you buy, you may be able to see your home increase in value. You’ll be getting something out of the purchase even if you don’t make money (you’ll be living there for years, after all), but it’s important to remember that your house is an investment as well as a home.
Your car is an investment, too
While it’s likely nowhere near as pricey as your home, your car is a big purchase. It’s easy to feel poor after you buy a car at the car dealership, but remember that at least some of the value of the car is still present after you drive it off the lot – in a pinch, you could sell it and make back some of the money. That makes it a valuable asset, even if it’s not necessarily a growing investment (very few cars appreciate in value – only collector cars and some other specialty vehicles do).
You’ll drive your car for years, and it will almost certainly decrease in value as you do, but it will likely remain one of your more valuable possessions for years. Treat it as such!
Protect your investments
When you think of your most important possessions as investments, you’ll realize that you need to protect them. Your car will likely decrease in value, but how quickly that happens depends a lot on how you treat it. If you invest in regular maintenance and repairs, get it detailed periodically, and drive it sensibly, then you’ll preserve its value far better than if you were neglectful and reckless. In other words, your net worth will stay higher!
The same goes double for your even more valuable investment: your home. Maintenance and repairs are key to keeping your space in tip-top shape, and it’s important to remember that neglecting these things makes them more expensive in the long run. If you wait too long to repair your electrical or plumbing systems, you’ll end up spending more. If you don’t repair them at all, and then try to sell the house, you can expect the price to be lower because of the expenses you’ve left for the next owners.
Your most expensive possessions are assets and a part of your net worth. When you think of them that way, you’ll be more careful to preserve their value – and you’ll make yourself that much richer in the long run.
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