This might come to you as a bitter shock, but the fact of the matter is the statement is 100% accurate. Your car, your super-cool smartphone, your smart watch, your expensive laptop, is not in any way can or will be considered as an asset. These things will never be an asset to you, what it will actually do is burn a hole in your pocket.
Assets vs ‘Personal Belongings’ – Knowing the difference
Confused? Don’t be. The reason these are not considered as an asset is actually quite simple. Your car is not an asset is because it does not yield you any income or appreciate in value. The same goes with all your expensive gadgetries. So, unless you are running a well-performing taxi service or a cyber café, these things are definitely not keeping your money safe, it is actually eating through it. Financially speaking, your car or your gadgets will not be termed as an asset, they will be termed as “personal belongings”.
Now let’s get down to the real reason why your car or your gadgets are not assets for you. The obvious and basic reason why your car or your i-phone is not an asset is it depreciates in value every second of every day and driving and maintaining it is eating away your wallet. For example, your car is constantly devouring your cash due to its constant maintenance, fuel, insurance and other things. You can actually buy a property with the money you are spending in keeping a car and that makes more sense because a real estate is actually going to appreciate in value.
Investing in assets or Investing in Convenience?
You might argue that how can a car or a gadget not be an asset when you can always sell it and get cash in return? You have to understand that your cash in the bank is actually your asset, the intention of selling the car or the gadget, which may or may not happen, cannot be an asset.
You might also argue that you might use the car or say an expensive laptop and borrow it against some investment purposes. In this case as well, the investment you do becomes asset, not your car or your laptop. Some of you also may argue that in your nature of work your car saves a lot of time and you can visit many clients in the same day, or say your expensive laptop helps you multitask faster, so you deem it as an asset.
You have to understand that I am not against the convenience of your car or your laptop. Your car might take you to a lot of places, or your laptop might help you work faster, and both of these activities might help you earn more money, and you can invest that money into meaningful places. Again, the investment you are doing is actually your asset, not your car or your laptop. The convenience only helps you to invest more, which is the asset you are building.
The Sense of Security – Real or False?
Do understand that I am not against having a car or nice gadgets, I understand the convenience it provides you. I am just trying to remove the false sense of security you are brooding in your mind, thinking your cars and your gadgets are actually assets, which they are not. It is also deluding you in thinking you are “doing well” because of the kind of car you are driving or the kind of smartphone you are using.
To maintain the image, you might be spending more on a car or a gadget you don’t need and might use it to invest somewhere else. You are also spending a lump sum annually to maintain your car and your gadget, which again you can save to invest wisely. Be wise, stop and think.
Put your money in the right place!