Assets are things that put money in your pocket while liabilities take money out. A typical example would be a car purchase. If you bought the car for your personal use, it is a liability. It would take money out of your pocket for gas and maintenance from time to time. But if you converted the same car into a taxi, it would immediately become an asset. Why? Because your taxi would put money in your pocket from time to time. Simple…!
Now the money game that gets you to the place called financial freedom is played by owning more assets than liabilities.
Owning assets is therefore a strategy of the rich and here’s the four different classes of assets, that if properly harnessed, can make you financially free.
- Business: Owning a business is route to financial freedom in the sense that your business pulls in a certain income from it activities. Facebook, Google and PayPal are businesses that started from scratch and have made its owners financial free. You might consider starting a business.
- Investments: Owning an investment like shares in a company can be a lucrative way to financial freedom in that over time you can grow your return applying the concept of compounding interest. Compounding interest has been called the 8th wonder of the world and if you keenly devote yourself to learning about it, it will certainly make you rich.
- Real Estate: Owning commercial property is another major way out of financial bondage. For this, I would refer you to the game of Monopoly. As long as there are people, there will always be renters and cash flow from this asset class. Owning a house or more that you can let out to others has been an age long way to freedom. Though capital intensive in certain parts of the world, property owners have for over centuries been known among the world’s rich.
- Commodities: Owning commodities in form of oil, metals or agricultural produce is another avenue to financial freedom. Because of the value the world has come to place on commodities, owning them has simply become a must-have for people looking to make it out of the rat-race.
These asset classes require in depth personal study. Look at one or two that resonate with you and make a plan of action.