Terrible and Okay Assets

Continuing the discussion that I began yesterday, let’s talk a little about two kinds of assets: “terrible” and “okay” assets.

TERRIBLE ASSETS:  A  “terrible”  asset is one that loses value over time and  which takes money out of our pocket each month. Can you think of any examples? Well, we  already  mentioned  an  automobile  and  how  quickly  it  loses  value.  But  some automobiles have an  even  larger impact on your wallet, especially if they are  big “gas guzzlers”.

And  what  do  you  think  about  smartphones?  While  a  piece  of  technology  may seem like a sound  investment, you should not view it as a  “good”  asset. After all, no  one  will  ever  be  willing  to  pay  you  full  price  for  it  later  on,  and  expensive service rates and data plans can end up costing you lots of money each month.

We  need  cars  and  we  need  telephones  to  go  about  our  day  to  day  activities. However, let’s call a horse a horse. A car, a smartphone, and other similar items are not true “assets” because they really don’t add anything to our wealth- they actually subtract from it.

OKAY ASSETS: An “okay” asset is one that stays more or less neutral in value and doesn’t  cost  or  make  you  any  money  per  month.  It  may  go  up  slightly  in  value over  the  long  haul,  but  it  is  not  likely  to  make  you  a  significant  profit  any  time soon.  A  good  example  of  an  “okay”  asset  is  your  home.  While  paying  a  $1,000 mortgage is  absolutely better than paying  $1,000  in  rent each month (because of the equity you can build up over time) chances are that your house is not likely to spike in value. If anything, it may even go  slightly  down  over  time.  A  house can  even  become  a  “terrible”  asset  if it begins to cost you lots of money in repairs,  as  may  be  the  case  when  it receives  severe  damage  that  is  not covered by an insurance policy.

Other examples of “okay” assets are collectible items. Some people like to  invest in  vintage  toys  mint  in  their  packages,  in  rare  paintings,  or  in  antique  pieces  of furniture. Each of these items is an “okay” asset because it will likely hold its value through  the  years  and  can  probably  be  sold in the  future  for  at  least  what  was paid for it, if not slightly  more. “Okay” assets  are cash-neutral from one month to the next, meaning they don’t have any  sort of effect on your wallet (unless you are charging people to see them, in which case they  can  become an “good” asset that provides cash flow over time).

“Okay” assets might not be the worst way to invest your money, but in terms of generating  the  cash  flow  that  you  will  need  to  pay  your  bills  from  month  to month, they aren’t really the best option.

Leave a Comment!

You must be logged in to post a comment.