What Is Your Real Asset
This is a posting about having a mindset that helps in wealth building. It is important to understand the difference between being rich financially and building wealth.
First becoming rich is not just about making money but about having an overabundance of assets (liquid and hard) over and above what you owe. A person that has $200,000 in income but owes $300,000 may be considered to be well off but is poor compared to a person with $50,000 who owes $10,000 because even after paying off the debt the $50,000 person has no obligations on the remaining income but the $200,000 person is bankrupt after paying obligations.
Wealth not only says there is no obligation but having the ability to do what one desires to do without, regard to cost of time or money. The other thing that sets the wealth buildingA�person apart is that their riches come with health, friendships, fulfillment and peace.
The greatest strength of those who build wealth is that they understand the rules of building wealth through studying others, executing the right actions, at the correct time, and learning the conditions under which wealth is made. They don’t just study but put to practice their knowledge and understanding of wealth creation. The main knowledge falls into the following areas:
How to obtain to protect to plan its to leverage to increase financial knowledge.
This does not just make one rich but makes a stronger statement; that ifA� allA�financial assets were taken away from a wealthy person they understand the rules of how to do it all over again, even if the medium used to obtain it is different.
I would like to show an illustration that gives a clue to what is the true asset that builds wealth.
Most believe that when you buy a home from a seller that the home is financed for the amount of sales price minus the down payment or earnest money. Let’s illustrate this with the following:
The house being bought sells for $150,000. $25,000 is paid as earnest money. This leaves closing cost, taxes, and $125,000 to be paid. After signing the paperwork (financing documents) you are given a deed to the property. Everyone congratulates you on being a new home owner. You are also told you now have an asset that will appreciate in value. At this point most believe that they have now financed a house.
Let’s translate.
First the house was not financed. You were financed and the house is actually collateral. Remember your credit was checked, not the houses credit.
Secondly the house is not your asset it is the banks. Remember that asset is not bringing you wealth but it is bringing the bank wealth. If you do not agree, look atA�theA�totalA�amount you pay over time. It is much more than the purchase price of the house if you stick to the terms and make all the payments outlined. It only becomes an asset when you own it outright or market conditions allow you to sell it for more than you paid for it.
Thirdly the bank has identified the real asset and without it no payments would be received. Yes, you guessed it. You are the real asset to the bank. Without you the bank does not have a good loan.
It is a fact that you are and will always be your best asset. It is your ability to dream, think, learn, calculate, analyze, build a team, comprehend and retain knowledge that is your best asset. Before entering into a financial transaction make sure you put your best asset forward.
Always invest in yourself because you are your best asset.A� The next postingA� will beA�how we can invest in our best asset.
