When it comes to investing, it's all about the assets, and that includes those with non-money ROI. What are YOU investing in?
I've been thinking a lot about investing and assets ever since attending a Rich Dad “training” event not too long ago. In the midst of all the priming, the “trainer” did make some good points, and one of those was a look at assets versus liabilities. When you're investing, it's all about looking for assets.
Of course, the point of this particular Rich Dad training was to get you excited about buying real estate “using other people's money” (to the guy's credit, he did warn that you can expect to pay 11 or 12 percent when you use private funding — the preferred method touted) and then to get excited about “investing” in a three-day training purporting to reveal the secrets of more effectively using this system to make money.
Personally, since I'm not interested in the kind of leverage Rich Dad pushes, this didn't really work for me in terms of being a viable asset. But it did get me thinking: What makes an asset? And what kinds of assets make sense for me?
What is an Asset?
First of all, it's important to understand what an asset is. Here are a few definitions of “asset” (I know, I know, it's lazy writing to do this):
- “Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.” (Wikipedia)
- “Assets are bought to increase the value of a firm or benefit the firm's operations. You can think of an asset as something that can generate cash flow…” (Investopedia)
- “An item of value owned.” (Merriam Webster)
Basically, an asset offers you a positive return on your money. You invest your money in an asset, and what you get back amounts to more than the value of your investment.
But here's where it gets tricky: Does the return?always have to be in straight monetary value? In some cases, you can make the argument that there are financial investments that yield high value in non-money ways. What makes a good investment isn't always cut and dry, especially when you start when you move out of the realm of “traditional” investments like stocks, bonds, real estate, and other commonly considered assets.
You want to put your money to work on your behalf, but you want to make sure that what you get out is valuable — even if you end up with a non-money ROI.
What Assets with non-money ROI Do YOU Want to Invest In?
An asset isn't always something with a financial return. A few years ago, I “invested” in camping gear that my son and I can use throughout the summer. That gear isn't providing me with a financial return. However, the non-money ROI has been great memories with my son, and I am teaching him valuable survival skills. This a return that enriches my life — even though the value of the camping gear depreciates each year. But I think that the investment is worth it.
Other investments might not pay off very quickly. Think about the ways you invest in yourself. Education, skills development, better relationships, and other items can provide you with long-term returns in terms of your life and even money. My educational investment has paid off in a good career that I can do on my own terms. My continued efforts to invest in conference attendance?also pay off. The gigs I land, the partnerships I form, and the things I learn as a result of my attendance more than make up for the expenditure.
Your first step is to consider what?you want to invest in. Even when you're putting money into a retirement account, you need to think about your desired outcome. Any investment will turn out better if you understand the motivations behind your investment. Think about what you hope to gain, and be realistic about the return. Also, delineate between financial returns and other returns. I know that my home isn't a fantastic financial investment. However, it has been nice to live here, able to do what I want with it, and able to provide my son some stability. (I think owning a residence is over-rated, but that's the subject of another post.) I also view my car as an asset, even though it depreciates each year, because of the intangible, non-financial benefits I receive.
A recent post over at Good Financial Cents explores different investments — some of which are a little unconventional. It's a great, eye-opening look at assets, and what might make a good investment. It should provide you with some food for thought.
Whenever you buy a thing or an experience, think about your ROI. Are you getting an asset? Will this enrich your life? Will you be able to use the asset to work toward your overall goals in life, financial and otherwise?
Make it a point to invest only in true assets.