Lesson 3 - Statements and Budgets - Part 5

Assets

Lifestyle Assets

Our quality of life is determined by Lifestyle Assets. These assets vary considerably from one individual or family to another. These assets are typically the “Big Ticket” items such as our house, cars, furniture and appliances. But Lifestyle Assets don’t include just “Big Ticket” items, they also include our hobbies, the purchase of gym equipment for example. They are whatever assets we have that help us shape our quality of living.

For many people the biggest Lifestyle Asset will continue to be there home if they purchased it. Old thinking was that the value of this Lifestyle Asset would always continue up. I hope we know by now that a home value might not always go up all the time. Again the market values of these Assets varies and requires us to periodically monitor their value. There are few things as damaging to our Net Worth  as selling our home for less than what we thought it was worth.

Investment Assets

We have only one reason for having Investment Assets, for the purpose of increasing our Net Worth over time. With Investment Assets we are generally looking for one of two things. This asset should provide income, or secondly an increase to Net Worth.

These are generally the type of Assets we want when saving for our future goals. These are the Assets that will allow us to gain interest and achieve our goals as they become due. This category of Assets also needs the most constant monitoring. If the value of our Investment Assets decrease, we could have trouble accomplishing our goals in the future. We might have to find different Investments, increase Investment Assets, or readjust our Goals.

Now that we have looked at the three different Asset Types, let’s look at the two different types of Liabilities.