Ever wondered how wealthy people get their wealth? The answer is by building assets. Whether inherited or not, at some point someone took the time to acquire assets that allowed them to build wealth. The truth is that simply working all of your life won’t make you wealthy. Instead, you should also focus on creating and acquiring things that have a monetary value. So, exactly how do you build assets? Keep reading!
What is asset building?
Building assets is simply increasing the amount of money, or access to money, that you have by buying assets. This is done by acquiring things that have present or future monetary value.
In general, the more assets that you acquire, the higher your net worth is. This is only true if you have significantly more assets than you have liabilities or debt. So when acquiring assets, it’s important to minimize the amount of debt that you use and maintain.
When it comes to building assets, each one builds on the other. For instance, you need money to buy land and land to build a home. You can also leverage one to acquire another.
For example, you can sell shares in a company to fund a car purchase. It’s important to understand this because asset-building does take time and some strategy.
Why does building assets matter?
Asset building is about much more than increasing your net worth. Having access to money allows you to improve your quality of life and even build generational wealth.
Just think of what you would be able to do if you have had access to more money. You could save for emergencies, start a business, and even pay for your child’s college tuition. Assets allow you to do more and have access to more in life.
What types of assets can you use for asset building?
Assets can be categorized in several ways, but we'll just focus on the three most popular categories. These are financial assets, tangible or physical assets, and intangible assets.
Financial assets can be best defined as something representing ownership of an entity or a claim to future payment.
Aside from cash, financial assets aren’t physical in nature and their value can fluctuate based on market conditions. They are also considered liquid assets, which means that they can be easily converted into cash.
Here are some examples of financial assets:
- Cash equivalent (Ex. a savings account)
- Certificates of deposit
- Retirement account
Tangible assets are also known as physical assets. These are things that are physical in nature. Examples of tangible assets include:
- Homes and real estate properties
- Fine art and collectibles
- Precious metals and coins
There are also assets that are intangible. This means that they aren’t physical in nature, but aren’t necessarily financial either.Examples include:
- Intellectual property
- Patents and copyrights
Appreciating assets vs. depreciating assets
When considering which assets to invest in, it’s important to understand assets change in value over time. Ultimately, this impacts how much money you actually have available to you at a given time.
Appreciating assets are things that go up in value over time. An example would be a home or in most cases, an investment portfolio. Depreciating assets are things that go down in value over time.
An example would be a car or any kind of mechanical equipment. The idea is to put your money into things that appreciate in value or time and minimize things that depreciate.
How do you get started with building assets/asset creation?
As a reminder, asset building takes time. Start where you are now and begin as soon as possible. The sooner you start, the more time you’ll have to acquire assets and for them to increase in value. Here are some things that you can do to build assets.
Increase your income
Remember that cash is an asset. So the first and easiest step that you should take in building assets is to get more cash. You can do this by increasing your income.
There are many ways to increase your income, including asking for a raise or starting a side hustle. The idea is to bring more money in so that it can be used to acquire more appreciating assets.
Put your money into savings
Remember that assets aren’t just about building future wealth. It’s also about improving your quality of life today. One important way to do that is to have money readily available to cover expenses.
Begin putting money aside in a savings account to cover things like emergencies and to also fund large expenses. Any savings accounts intentionally meant to fund future purchases are called sinking funds.
You also want to begin saving for retirement. Your retirement account is an asset that will benefit your future. The sooner you start saving, the more time your money has time to grow.
When saving for retirement, be sure to take advantage of any company matches. These matches are essentially free money toward your retirement savings.
Invest in the stock market
Once you’ve acquired more cash, you need to allow it to work for you. This means that you should put your money in a place where it will appreciate, or grow, over time. The best place for this is investing long-term in the stock market.
Equities are a type of income-producing asset that can benefit you now or in the future. You can use the dividends earned from stocks to acquire other assets or for other financial goals.
Contrarily, you can simply let your money grow over time for future use. You can check out our free investing courses to learn how to get started.
Invest in real estate
Buying a real estate investment property or land is another step in building your assets. Real estate is important because it will increase in value over time. As more people populate the earth, space becomes even more limited—making property more valuable.
When it comes to real estate, though, the key to it being an asset is equity. In simple terms, it just means that the property is worth more than what you owe or purchased it for. This is the only way that your property will be an asset and not a liability.
There’s debate as to whether a home is an asset. The fact is if your home has equity or your mortgage is completely paid off, it can be considered an asset.
Reduce your debt
Debt can completely undo all of the work that you’ve done to build your assets. That’s why a part of asset building is also debt elimination. Debt can slow down your ability to acquire assets because it ties up your cash.
Mortgage lenders even take your debt into account when determining if you qualify for a loan. If your debt to income ratio is too high, you won’t be able to get approved. This is just one example of debt hindering you from asset building.
In the case of a mortgage loan, you can leverage debt to build assets. However, this should be done very strategically. You don’t want to end up in more debt than you can afford to quickly pay off.
Start building assets today
Asset building takes time, so start today! You don’t have to do everything at once, but you can start where you’re at to create a better future for yourself.
Keep in mind that this is just one part of building wealth. You also need to have the right mindset and community. We’ve provided the tools to help with all three!
Be sure to check out our free courses and community as you start your journey to building wealth.
- Real Estate Assets.
- Savings Accounts.
- Certificates Of Deposits.
- Private Equity Investing.
- Peer-to-Peer Lending.
- Building A Business.
- Step 1: Make Money. This step may seem elementary but is the most fundamental one for those who are just starting out. ...
- Step 2: Save Money. Simply making money won't help you build wealth if you end up spending it all. ...
- Step 3: Invest Money.
- Dividends paying stocks.
- Index funds and ETFs.
- Fixed term deposits.
- Inflation-linked bonds.
- Property investing using leverage.
- Open an IRA. Bolstering your retirement savings is a great use of $10,000. ...
- Invest in Mutual Funds and ETFs. ...
- Build a Stock Portfolio. ...
- Invest in Bonds. ...
- Buy Real Estate with REITs. ...
- Prepare for healthcare costs with an HSA. ...
- Considering Crypto? ...
- Focus on the long-term.
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Someone is considered a millionaire when their net worth, or their assets minus their liabilities, totals $1 million or more.What assets do millionaires buy? ›
For more than 200 years, investing in real estate has been the most popular investment for millionaires to keep their money. During all these years, real estate investments have been the primary way millionaires have had of making and keeping their wealth.What asset gives the highest return? ›
Stock markets offer the highest and inflation-beating returns.What are the 4 stages of building wealth? ›
He found that building wealth involves a four-step process: Growing income, controlling spending, investing in index funds, and finding additional investment sources — namely, real estate.What are the 8 wealth Building assets? ›
The eight capitals: intellectual, financial, natural, cultural, built, political, individual and social. To build a region's wealth, WealthWorks considers not just financial assets, but includes the stock of all capitals in a region.
- Become Financially Literate Through Self-Education.
- Spend Less, Earn More, Invest the Difference.
- Do Something You Love.
- Invest in Properties.
- Build a Portfolio of Stocks and Shares.
- Focus on Contemporary Areas of Growth.
- Be An Innovator.
- Do Quarterly Goals & Reports.
- Stocks & ETFs. ...
- Use a Robo-Advisor. ...
- Chip Away at High-Interest Debt. ...
- Use Real Estate Crowdfunding Sites. ...
- Invest in U.S. Treasury Securities. ...
- Use a High-Yield Savings Account. ...
- Consider Alternative Assets. ...
- Invest In New Skills.
- High-Yield Savings Account (UFB Direct) ...
- Dividend Stocks and Stock Funds. ...
- Bonds and Bond Index Funds. ...
- Certificates of Deposit (CIT Bank) ...
- Money Market Accounts (CIT Bank) ...
- Real Estate Crowdfunding.
- Buy Fractional Shares of Stocks and ETFs. ...
- Invest Your Spare Change. ...
- Dollar-Cost Average Into Low-Cost ETFs or Mutual Funds. ...
- Invest in Stablecoins on a High-Interest Rate Platform. ...
- Lend Your Money for High Interest With Peer-To-Peer Lending. ...
- Own a Piece of Real Estate Through REITs and Crowdfunding.
- Savings Account.
- High-Yield Savings Account.
- Retirement Plans – 401k.
- Retirement Plans – IRA.
- Traditional IRA.
- Roth IRA.
- Health Savings Account.
- Brokerage Account.
- Start small. The first step is to buy your first property. ...
- Create an automatic saving plan. Every month, one of our brokerage accounts automatically pulls cash out of the bank account. ...
- Put the properties into an LLC. ...
- Use a property manager. ...
- Build your empire.
- Invest with a robo-advisor.
- Invest with a broker.
- Do a 401(k) swap.
- Invest in real estate.
- Put the money in a savings account.
- Try out peer-to-peer lending.
- Pay for an education.
- Pay off debt.
Man's greatest *asset* is the unsettled mind." This is because unsettled minds are a necessary prerequisite for "man to be man - which is more important than merely to live." Adrastus is then revealed to have almost certainly engineered this encounter to correct this misattribution.What assets go up in value? ›
- Stocks. → How to Research Stocks. → How to Buy Stocks.
- Real Estate. Protect Your Margins With Hybrid Property Management.
- Crowdfunded Real Estate Platforms.
- Real Estate Invest Trusts (REITs)
- Rare Art.
- Fine Wine.
“90% of all millionaires become so through owning real estate.” This famous quote from Andrew Carnegie, one of the wealthiest entrepreneurs of all time, is just as relevant today as it was more than a century ago. Some of the most successful entrepreneurs in the world have built their wealth through real estate.
- Earned Income From a Paycheck. ...
- Profit Income From Owning a Business. ...
- Earning Dividend Income From Owned Stocks. ...
- Bringing in Rental Income From Owning Real Estate. ...
- Capital Gains From Selling Assets That Appreciate in Value.
- Develop a written financial plan. Saying you want to be wealthy won't get you there. ...
- Get into the habit of saving. ...
- Live below your means. ...
- Stay out of debt. ...
- Invest in ways that work for you. ...
- Start your own business. ...
- Get professional advice.
You can't depreciate assets that don't lose their value over time – or that you're not currently making use of to produce income. These include: Land. Collectibles like art, coins, or memorabilia.Where do super rich keep their money? ›
For more than 200 years, investing in real estate has been the most popular investment for millionaires to keep their money. During all these years, real estate investments have been the primary way millionaires have had of making and keeping their wealth.What is the #1 safest investment? ›
Here are the best low-risk investments in December 2022:
Series I savings bonds. Short-term certificates of deposit. Money market funds. Treasury bills, notes, bonds and TIPS.
- Say No to Debt. ...
- Be Consistent in your Investment. ...
- Don't Put All Your Eggs in One Basket. ...
- Switch Investments as Your Priority Changes. ...
- Start Early. ...
- Invest Smartly. ...
- Put Your Fear Aside. ...
- Get Expert Advice How to Grow Your Money.
- Savings Accounts.
- Certificates of Deposit.
- Mutual Funds.
- Exchange-Traded Funds.
- Financial Advisor.
- Invest on Trading Platforms.
- Real Estate.
- Invest in Yourself.
Everyone has four basic components in their financial structure: assets, debts, income, and expenses. Measuring and comparing these can help you determine the state of your finances and your current net worth. You can think of them as the vital signs of your financial circumstances.How do I start building generational wealth? ›
- Invest In Your Child's Education. Raising financially independent adults is important if you want to build lasting wealth. ...
- Invest in the Stock Market. You can invest in many assets. ...
- Invest in Real Estate. ...
- Create a Business to Pass Down. ...
- Take Advantage of Life Insurance.
"Your income is your greatest wealth-building tool," Ramsey has repeatedly said, including on the Ramsey Solutions blog as well as on Facebook. Ramsey believes that if you use your income wisely by investing 15% of it, you can build the financial security that you deserve and perhaps even become a millionaire one day.
- Professional athlete.
- Investment banker.
- Certified public accountant.
- Insurance agent.
- Real estate agent.
Instead, UHNWIs understand the value of physical assets, and they allocate their money accordingly. Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork.What do most millionaires do for a living? ›
According to this data, banking and finance professionals were far and away the most likely to become millionaires, and it doesn't seem surprising. After all, not only do jobs in that industry tend to pay well, but people who do them will naturally have an advantage in terms of knowledge and understanding.How can I invest 1k and make money? ›
- How to invest $1,000 to make money fast.
- Play the stock market.
- Invest in a money-making course.
- Trade commodities.
- Trade cryptocurrencies.
- Use peer-to-peer lending.
- Trade options.
- Flip real estate contracts.
- Start (or add to) a savings account. ...
- Invest in a 401(k) ...
- Invest in an IRA. ...
- Open a taxable brokerage account. ...
- Invest in ETFs. ...
- Use a robo-advisor. ...
- Invest in stocks.
- Index funds. ...
- Actively managed funds. ...
- Robo-advisors. ...
- Stocks. ...
- 401(k)s and IRAs. ...
- Real estate investment trusts. ...
- High-yield savings account.
Some of the most common types of safe assets historically include real estate property, cash, Treasury bills, money market funds, and U.S. Treasuries mutual funds. The safest assets are known as risk-free assets, such as sovereign debt instruments issued by governments of developed countries.What is the cheapest asset? ›
But commodities are the cheapest asset class in the world right now," says Jim Rogers. Investment guru Jim Rogers says he would rather own commodities than stocks because the former is the cheapest asset class in the world now on a historic basis.How do I start investing with no idea? ›
- Examine Your Finances. First things first: it's important to get real about the state of your finances. ...
- Do Your Research. What does investing mean, anyway? ...
- Experiment With Stocks. While there are many different investing opportunities, consider getting started with individual stocks. ...
- Consider Mutual Funds. ...
- Settle In.
- 12 ways to start investing if you don't have much money. ...
- Open a retirement account. ...
- Invest in an index fund. ...
- Diversify with an ETF. ...
- Purchase fractional shares of stock. ...
- Get started in real estate. ...
- Put your money in a CD account.
A person's most useful asset is not a head full of knowledge, but a heart full of love, an ear ready to listen and a hand willing to help others.What are your top 3 assets? ›
Your three greatest assets are your time, your mind, and your network. Each day your objective is to protect your time, grow your mind, and nurture your network. Top performing salespeople understand what this means and they don't allow themselves to fall victim to spending time on non-revenue producing activities.What are the top 5 assets? ›
- Dividend Paying Stocks.
- Real Estate Crowdfunding.
- Real Estate Investment Trusts (REITs)
- Online Businesses.
- Rental Properties.
- Peer to Peer Lending (P2P)
There are only three assets that matter to live a long, happy life: Health. Time. Money.How can I double my net worth in 5 years? ›
- Pay Off Credit Card Debt.
- Build an Emergency Fund.
- Pay Off Student Loans.
- Max Out Retirement Contributions.
- Live Below Your Means by Cutting Expenses.
- Pay Yourself First.
- Invest in Yourself.
- Keep Money You Have Saved In Places It'll Grow.
- Cash and cash equivalents.
- Accounts Receivable.
- PPE (Property, Plant, and Equipment)
- Patents (intangible asset)
- Teamwork. Working with others, especially being able to respect others' different opinions, is an important component of teamwork. ...
- Empathy. ...
- Patience. ...
- Time Management Skills. ...
- Interpersonal Skills.
- High-yield savings accounts.
- Short-term certificates of deposit.
- Series I bonds.
- Short-term corporate bond funds.
- S&P 500 index funds.
- Dividend stock funds.
- Value stock funds.
- Nasdaq-100 index funds.