Knowing the different types of assets you have at your disposal is crucial. Whether you are considering personal or business finances, this plays a big role.
When it comes to accounting, this is something that will be brought up again and again. It’s part of what determines your net worth and lending power.
Are you organizing your finances? Or do you just want to learn a little more about how net worth is determined? Keep reading to learn the inside scoop about assets and how to manage them.
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Understanding the Asset Classes
Of course, not all assets are created equally. Some are worth more than others.
There are many things to take into consideration when determining the value of a given asset.
But first, we need to define the different types of assets. You could be sitting on an asset right now and not even know it.
Tangible Asset Examples
This is pretty straight forward. These are actual things that you can touch, see, and feel.
In fact, it’s what most people think of they imagine assets. For the most part, they are things you can point to.
If there is a downside, it’s that tangible assets can be taken away.
Building assets are a big one. In fact, it is oftentimes a person’s most valuable asset.
If you own a home and/or are paying off the mortgage, you have an important asset. This also applies to commercial properties, such as office buildings, warehouses, laboratories, restaurants, and apartments you manage.
Each property’s value is determined by a number of things. This includes the location and the characteristics of the building itself. A building in Manhattan is almost certainly a more valuable asset than one in the middle of ‘nowhere’.
A land property might actually be something you can hold. But you can definitely see and feel it (and maybe even smell it, if you like).
Even if it is an ’empty’ plot of land, it still has value. Going back to what they say in real estate: location, location, location.
A pristine plot of land overlooking the ocean is going to be worth more than a piece of scorched earth next to a landfill.
If you can drive it or ride it, you can bet your bottom dollar that it’s an asset. Cars, trucks, and motorcycles are all valuable assets.
But it doesn’t end there. Don’t see yourself short. Bicycles and other self-powered vehicles can be assets, too. This is especially true if you use them for business.
The value of these kinds of assets can change over time. Be sure to take good care of them so they retain their worth as much as possible.
Machinery and Equipment
There can be some overlay between machinery and vehicles, in the case of cranes, forklifts, and other drivable machines. Generally, these are used for some type of function other than transportation (and looking cool).
Some construction vehicles can easily be worth hundreds of thousands of dollars. It certainly nothing to shake a stick at.
Also, equipment and stationary machines you own can often be considered assets. For example, kitchens tend to have some very valuable pieces of equipment. These have value on top of what the building/property is worth.
Straight Cash (and Equivalents)
Are you the type to keep money under the mattress? Well, you’ve got an asset! And it’s a reliable one to boot.
You might be surprised to know that money is an asset, too. After all, cold hard cash is something you can see and touch (and count).
However, it doesn’t stop there. Cash equivalents include checking or savings accounts and money market investments. So, anything that can be readily changed for cash is also an asset.
Generally, we don’t think of assets as being living things. But if they have a market value, they certainly can be.
For example, you wouldn’t put your family pet up for sale (or would you?), but maybe you professionally breed American Staffordshire Terriers. Those little (and adorable) puppies are worth money.
Livestock, such as horses, sheep, cows, llamas, and whatever else you got, are all biological assets. Plants can be assets, too. Cannabis plants are one of the most valuable plant assets on the market.
Intangible assets can be a little hard to put a finger on. You might have a piece of paper that denotes their existence, but they aren’t anything you can build on, live in, or ride.
That doesn’t make them any less real or valuable. In fact, they just might be the most important asset you own.
These include different types of intellectual property. Let’s take a closer look.
Most people are familiar with the term. But what exactly does it mean to copyright something?
If you own the copyrights to something, it means you own the right to copy it as you like, within the conditions of the contract.
This often applies to art, such as music, a name, a design, or a movie script. It means you’re allowed to perform, distribute, and create derivative works. It is usually for a limited time.
Have any good ideas that could be worth money? Make it into an asset by getting a patent for it.
Having a patent gives you exclusive rights to making and selling products and/or services based on your idea.
Asset Protection and Lending
It is one thing to have assets. But are you practicing good asset management?
Instead of sitting on them, maybe you should look into how they can work for you. Visit this page for more information from the experts in asset allocation.
Managing Different Types of Assets
Some people get a real thrill from discussing finances. Others get bored to death.
But it doesn’t matter if you’re an investment banker or play in a punk rock band. It’s important to understand the different types of assets and care for them.
Are you doing enough to get the most out of what you have? Visit our blog for more articles about money and finances.