A refrigerator is a device to keep food fresh, but it cannot do so forever. Over time food inside...
The Good, the Bad, and the Ugly is a 1966 movie starring Clint Eastwood (the good), Lee Van Cleef (the bad), and Eli Wallach (the ugly).
While all three actors were great assets for the movie, today's discussion is not about them.
Welcome to Day 17 of the Win With Money Challenge
Today's task is knowing your assets and classifying them as Good, Bad, and Ugly. Based on their potential contribution to your wealth accumulation and financial freedom.
The traditional definition of an asset is "A thing or resource that is or will be useful and holds value."
However, Robert Kiyosaki has a more helpful definition: "An Asset is anything that puts money in your pocket. A liability is anything that takes money out of your pocket."
While this definition may not fit into accounting principles, it makes more sense if your goal is growing wealth and achieving financial freedom."
Using the above definition, we will classify assets as Good, Bad, and Ugly.
The purpose of this classification is not to degrade any asset but to understand its role in helping you build wealth.
Assets that can grow in value, provide an income, or do both at a rate higher than prevailing inflation.
Examples of good assets are
It would be best if you aimed to have more good assets in your portfolio to help you beat inflation and grow wealth.
Assets that are a store of value but don't beat inflation.
Examples of Bad assets are
While these assets are classified here as bad, they are not so bad, actually. In fact, they are pretty useful as a store of value in the short term. They also provide the much necessary liquidity to weather economic storms and personal emergencies.
They only become bad if all or most of your wealth is sitting in such assets.
Assets that provide utility only. Depreciate in value and or need constant upkeeping.
While these assets are of some value and mostly utility, they do not help generate income or grow wealth. On the contrary, you may need to keep spending money to maintain these assets. Hence they are classified as ugly.
Go ahead and classify your existing assets in the above categories and see how much you have in each.
Try and understand the role of assets in your portfolio. Build more of good assets if you intend to grow wealth.
This is the task for Day 17.
Can you believe that we have now crossed more than 50% of the challenge?
I hope this has been of value to you.
Feel free to share your feedback and ask any questions you may have.
See you tomorrow.
Author, Blogger & Independent Financial Advisor. My goal is to give you actionable tools for creating passive income and building wealth. More than 10,000 expats have already used my ideas to jumpstart their journey towards financial independence. Connect with me to start yours...