Types of Assets You Need to Reach Your Financial Goals
There is a whole world of things you can do. The most important ones are to be healthy and happy.
To build financial wealth, you first have to understand what assets are and how to accumulate them. Certain types of assets have a certain value. Some are more valuable than others. To have a positive net worth means your assets are greater than your liabilities (debts).
So let’s review the types of assets you need to build wealth and achieve your long term financial goals.
As we go through each asset class, I will also recommend the online tools you can use to manage those assets. This will help you build wealth.
There are ten online finance “stores,” which are tools you can use in the Goalry Mall:
To accurately estimate home values.
To pay bills easily.
To manage your budget allocations.
For help managing emergency cash needs.
To improve your credit history.
To take control of debt.
To manage insurance policies.
To manage loans.
To manage tax information and file tax returns.
To build wealth.
In this way, you can see how the Goalry financial tools make managing your financial health so much easier. Use the tools you need as part of the overall comprehensive system. Doing this is very satisfying when you know you are in better control of your financial future.
Major Asset Classes
In our discussion of the general categories (classes) of assets, I have listed them in the order that I think is the most valuable first. You can consider this guide a decent life path to follow by focusing on each category until you achieve success by adding an asset in that category to your financial foundation. Then, you can go on to add more assets from different categories using common savings goals.
1. Body, Mind, and Spirit
Does it surprise you that I list you first? The biggest mistake any person can make is to chase material wealth while neglecting their mental, physical and spiritual health. Compared to good personal health, material possessions are far less valuable.
The opposite of “live long and prosper (in good health)” is not “live fast and die young.” It is to live long enough to suffer from horrible chronic diseases before death. There is little point in living a long time if you have an extremely low quality of life. If you get really sick, you will be willing to trade every material possession you have for good health.
Want to be rich?
I know many billionaires. With the sole exception of Paul Allen, they are miserable wretches. The big problem is that they do not even know this about themselves. Paul Allen is the exception because he walked away from Microsoft after he was a “baby” billionaire. When he retired early from Microsoft, Allen started doing things that made him happy. He loves to play guitar. He would rather have more time to play guitar than make another billion dollars.
Let me illustrate this with a story…
A rich guy from New York went on a short vacation of just a few days because he was too busy to take off more time. He went to a beach town in Mexico. One morning from his hotel balcony, he saw a fisherman go out from the beach and return midday with his catch. He went down to the beach to talk with the fisherman.
The rich guy explained to the fisherman that if he was motivated, he could go out earlier in the morning and spend more time fishing to increase his daily catch. Then, he could buy a second boat from the additional profits. As he built up more success, he could add other boats until he had a fleet of them. He could make a big company and take it public.
The fisherman patiently listened to the rich guy and then asked, “Why would I want to do that?”
The rich guy explained because then you can retire a wealthy man, live on the beach, go fishing every day, and spend lots of time with your kids!
The fisherman smiled and said, “But, I already do that.” Then, he left the foolish rich guy standing there with his mouth agape, and the fisherman went to spend the rest of the day with his family. They were waiting for the fisherman to return home to his beach house and enjoy eating part of the day’s catch together.
Get it? If you spend all of your time accumulating wealth, then you are missing the whole point of being alive. You need to have a balance between mental, physical, and spiritual health and financial health.
How to Avoid the Billionaires’ Problem
One time when Bill Gates visited Las Vegas for a computer convention, a reporter asked him if he liked to gamble in the casinos? He told the reporter, no. Gates said, “I would only enjoy gambling if I could win time instead of money.”
Bill Gates transformed into a much nicer person through the positive influence of Melinda, his wife. Still, so many in the world think Gates is evil. The guy is trying to eliminate horrible diseases with his foundation. Conspiracy nuts think he is trying to “chip” everybody to be able to control them. Such is the legacy of one billionaire who is a decent guy now, and still, so many think badly about him based on falsehoods.
Personally, I think Paul Allen made a better, earlier choice. However, I appreciate immensely what the Bill and Melinda Gates Foundation is doing. There is always hope for the redemption of even the most greedy billionaires.
If Jeff Bezos made all of his employees co-owners in Amazon, with everyone getting an equal ownership share, I might think more highly of Bezos too. I hope he considers this as his legacy to give the company to his employees upon his death. His ex-wife already got her gigantic share since she helped Jeff start the company. If Bezos turns Amazon into an employee-owned company before he dies, that would be impressive!
To avoid the billionaires’ problem, it is fair to say that dividing your efforts into equal portions of attention paid to mental, physical, spiritual, and financial health is a very wise strategy.
The Goalry tools for financial health could be augmented by one more store called Healthry for online tools that help with mental, physical, and spiritual health. Don’t you agree? If not here, please do find these online resources elsewhere. You will not regret this lifestyle choice.
The tools to use for this asset are common sense and the Goalry Mall.
2. Savings
The first asset you need is to build an emergency fund of savings that you can draw upon if something goes wrong. The goal is to have at least a minimum of three months of income put away. The pandemic taught us that work might disappear in certain sectors without any warning. It is better to have one year of income stored away for emergency use.
I recommend going to the bank and getting new currency in smaller denominations. Put the cash away in a secured, locked, fire safe, in a place that keeps it available for use only in the case of emergencies. Regularly, put cash away until the emergency fund is created. This is your protection if bank cards do not work.
Even if you do this slowly, it only takes 20 monthly paychecks at 5% to have one month’s emergency reserve. Even small amounts saved add up over time.
How can you save this money? Pay yourself first.
Take at least 5% (better 10%) of each paycheck and store it away before paying anything else. If you cannot pay your bills with the rest of the money, you are out of control, financially speaking. You need to get your debts and spending in better alignment with your income.
If you are interested to start saving, check below a savings account suggestions:
3. Stock
After you have your emergency fund that you keep in cash, then you want to build up your stock portfolio. Take that same amount of 5% or 10% of each paycheck and buy stock with it. The types of stock you want to buy are value stocks. It is even better if they create passive income for you by the payment of dividends.
If you need ideas about stocks that are good choices, just use CNBC’s Berkshire Hathaway Portfolio Tracker for the listing of the stocks owned by Warren Buffet’s Berkshire Hathaway and buy those stocks.
Don’t worry about “playing” the stock market. Just buy value stocks regularly. Through the power of dollar-cost averaging, you will build a substantial portfolio over time.
Set up an investment retirement account (IRA). Contribute the amount of earned income that is the maximum allowed of $6,000 (2021) for an individual each year ($7,000, if older than 50). If you have less than $7,000 of taxable income after deductions, you can contribute up to your taxable compensation for the year, and then it becomes tax-deferred income. The idea of an IRA account is to pay taxes on the income later in life when your tax bracket should be lower.
Use this money held in your IRA account to buy stock. Use a buy-and-hold strategy. Rarely sell any stock unless a major problem occurs.
For example, it made news when Berkshire Hathaway sold its positions in the airline industry during the pandemic because Warren Buffet rarely sells any stock that he acquires. Buffet waits to buy a stock of a company he likes when it is selling at a very low price and then buys as much as he can with the usual time horizon of holding the stock forever.
For this asset class, you need to have extra cash after paying bills, budgeting properly, and managing debts. For these needs, use Billry®, Budgetry®, and Debtry®.
Set Up Your Daily, Weekly or Monthly Budget with Budgetry.
4. Real Estate
Stop paying rent as soon as possible and buy a home. I know for younger people this seems impossible, but I have never paid rent in my entire life, and I am an old fart now (63). When I was younger, I moved out of my parents’ house when I was 16 years old (I graduated from high school early) because I could not stand the abuse of living with them.
I could not afford to pay rent, so I got work repairing and managing properties in exchange for a “free” apartment on the premises.
The point is to be clever. Think of a home as both a place to live rent-free and a money-maker. For example, today, you can “hack” a large enough home and rent out portions to others to pay the expenses while living there for free. Paying rent is for dummies.
5. Whole Life Insurance
If you are young (in your twenties or thirties), you must get whole life insurance because it is so cheap when your age is low. This goal is to get enough life insurance to pay burial expenses and take care of surviving loved ones.
Whole life insurance is an asset because it builds cash value over time. If you pay $25 a month for about 35 years for steady premium (non-increasing), whole life insurance, you can have it reach paid-up status. Then, if you do not die prematurely, it will be a valuable asset to use for your retirement. In the case of an emergency, you can easily borrow against the life insurance policy’s cash value.
6. Precious Metals
Owning physical precious metals, such as gold or silver coins, provides protection from inflation and the continual devaluation of the U.S. dollar.
On August 15, 1971, President Richard Nixon announced that the United States would no longer convert dollars to gold at the fixed price of $35 per ounce, abandoning the gold standard. Now, gold is $1,780 per ounce (April 17, 2021).
To understand the impact of inflation and dollar devaluation over time, the same amount of $35 in 1971 has the buying power of only $5.35 in 2021.
To manage your wealth-building efforts, use the Wealthry® tools.
7. Collectibles
This is a fun one. Occasionally, when you buy an action figure, toy, comic book, or another collectible item, purchase an extra one. Keep the extra one in a perfect, unopened condition and in its original packaging. Store it in a climate-controlled environment where it will not be damaged by moisture, temperature, or insects. Wait 50 years. Then, you might be shocked at how valuable your collectible item has become.
People Magazine reports an amazing valuation achieved for an original Action Comics #1, featuring the first appearance of Superman (published in June 1938). When new, this comic book sold for 10 cents. One recently sold for $3.25 million during an online auction. There are only around 100 copies known to exist. Many are lost or stored away in attics and basements. Keep an eye out for the missing ones!
Conclusion
As Seth Goodin says, “Assets go up in value, and expenses do not.” Tools are reusable, and our assets have value to us and hopefully to others. Skills are an investment that compounds as they grow. Expenses are the energy-drainers that fade away. Focus on your personal (mental, physical, and spiritual) assets, then your financial assets. Balance them to have a happy life.