An asset is something of monetary value that you own. You may have already purchased some major assets – a car,
a house, even furniture can be considered assets as long as you own them (or have a mortgage/ loan for them) and don’t
lease or rent them.
Assets are an often forgotten part of your wealth portfolio – they have a value if you
sell them, and they have a ‘cost’ to replace them if they are damaged.
An important part of managing
your finances therefore is to manage your assets – and choose them carefully in the first place!
You also
need to understand your net worth, or the net value of your assets. To determine what your assets are ‘worth’,
there are a few things you need to consider:
- Re-sale Value: this is how much your assets are worth
- that is, if you sold your car for example, how much money could you get for it?
- Replacement Value:
this is how much your assets would cost to replace (and should be the same as their insured value) – if you had to rebuild
your house, what would this cost. This could be more or less than the original purchase price and resale value, depending
on the asset.
- Liability: this is how much you owe for the asset – that is, if you purchased
the asset by a loan, how much of that own is still owing.
Your net assets are then simply the value of all of your
assets minus the sum of all your liabilities – and hopefully this is a positive number!
There is an asset
record sheet in the
ToolBOX under Financial Tools you can use to keep track of your assets.
And find out more about protecting the value
of your major personal assets -
your home and
your car.
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