What is an asset? Sounds like a fancy accountant term. In reality, an asset is something of value which you own but smart money investors expect to not only own assets but have those assets bring in cash flow monthly. Boy, was this a lesson for me.
For example, by definition my horses are assets, but they cost me money rather than making me any. Money smart investors would not invest in horses but they are my family. Money is not everything and I never think that way.
According to one of my money smart mentors, Robert Kiyosaki, there are 4 classes of assets which bring you cash flow monthly. They are:
Businesses – the advantages of owning a business are tax benefits, the ability to leverage other people’s time to increase your cash flow monthly and control of the way things are run. The disadvantages include high startup costs, managing people and developing the money smart skills to turn a regular profit.
For me starting a network marketing business was perfect to help me get started in building an asset. Once I understood the power of leveraging other people’s time without having to actually employ them I was willing to get started. I did not have the money or desire to get into a franchise business so the low startup cost of network marketing was perfect. I found a product I loved and was passionate about and a company I believed in.
Five hundred extra cash flow monthly is so doable with Network Marketing. I pick the $500 amount because studies show with this amount of extra cash flow monthly 95% of the home foreclosures could have been avoided. This level of extra cash coming in each and every month is life changing for many households.
Real Estate – the advantages of owning investment real estate include the ability to leverage the bank’s money, take advantage of tax benefits like depreciation and collect a steady cash flow monthly if the property is managed well. The disadvantages include significant skills to select good properties, the money smart skills to manage them and ability to have money tied up in property.
Paper assets – the advantages of paper assets include the ease to buy and sell them and the ability to start with a small investment. The disadvantage is the need to become educated and spend the time to monitor your paper assets closely.
Commodities – Oil, Gold and Silver are examples of commodities. These are real, physical assets that go up in value as inflation increases. Commodities are less likely than paper assets to increase or decrease rapidly in value and they are less affected by people’s daily fluctuating emotions. The disadvantage is that since they are physical, they have to be stored and this can increase the cost.
Part of being money smart is to pay attention to trends and cycles. What is working right now may not work next week, month or year. It is important to pay attention to your money but not dwell on it. Dwell on your dreams. Those who gain the money smart skills of getting rid of bad debt, building cash flow monthly and investing in assets will be able to live their dreams.