Understanding Assets

Many people don’t grasp the importance of fully understanding what assets are and what they can do for you. Assets are not just things you want to accumulate throughout the early parts of your life, they are important to have during retirement as well so that they can continue to make you money long after you stop working.

 

Most forms of insurance, such as Medicare supplement plans, are not considered assets. Assets must have some form of immediate value that you can realize from them. This doesn’t necessarily mean they have to be physical in nature, there are both tangible and intangible assets. As long as it is something you could sell, or liquidate, for some value, is in an asset. In that respect, assets could actually be considered a form of insurance. If you lose your job or are short on money, you can sell an asset for money.

 

Tangible assets are fairly easy to identify. Cash is the most obvious tangible asset, but things like buildings, land, equipment, or machinery are also tangible assets. Many times you can even use these assets to create even more value for you above the actual value of the asset itself. For example, having a tractor means you can sell that tractor for its value, but you can also use that tractor to farm your land or help in the construction of buildings, earning you even more money. Without the asset, you would be hard pressed to make the same money as you can with it, and you may even end up spending money if you have to pay someone else with the asset to do it for you.

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Intangible assets are more difficult to spot. These are licenses, copyrights, trademarks, patents, and other intellectual property that you own. Despite not being physical in nature, in many cases they can be even more valuable than tangible assets. For instance, intangible assets are not subject to wear and tear like some tangible assets are, such as buildings and vehicles. You can not overuse intangible assets. In fact, because they are not physical in nature, you can allow use of them to many people at the same time and make money off of the very same asset from various different people. You wouldn’t be able to loan out your tractor to 5 people to use at the same time, but you can certainly license out your patent to as many people as you like all at the same time.