A Short Guide to Asset Investing
If you are looking into what it takes to become a successful investor, or how to generate forms of passive income, then learning the basics of how to acquire assets is where to start. There are two main ideas presented here. First you need to have a clear understanding of what an asset is. This idea is simple but understated. Combined with the knowledge of what assets and liabilities are, you have to want them. You are not going to give up buying your new toy for an investment unless you really want to. Next you simply need to understand what kind of asset you can afford and start pursuing it.
What is an asset?
The first step to financial success is to learn how to start acquiring assets and stop wasting all of our money on liabilities. For the average person, almost every penny earned is a penny spent on something that will never have a financial return. In fact, many of the things that we buy end up taking even more money out of our pockets through maintenance, repair, and replacement. Like that new phone you just bought, or the new HDTV you needed. Following this thought, what do we then spend our time doing? Watching the TV you just spent all your money on or facebooking on your new phone. Learning to think a different way about your earnings and your time and what to do with them is the start to making real changes that will dramatically affect your future. Put simply, an asset is something that generates income for you. A liability is something that takes your income. This is the main idea of the book Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!.With your purchases you need to start asking the question: will this take money from my pocket or put money in my pocket?
Of course you cannot judge every dollar you spend that way but you need to at least think about it and be aware of the concept. There are also many things that will not directly put money in your pocket but will help the process, or will indirectly help you. Like tools for whatever investment you are working on, or classes and books to help with you knowledge base on investments.
Decide what kind of investment is for you
There are many way to start acquiring investments and they all take your time, or money ,or both. The key to starting your investments is to start realizing that you are dumping all of your money and time into liabilities. When this realization it made you can start researching ways to take some of that hard earned money, or your free time, and invest it into something that will take care of you instead of the other way around. Here are a few sample investment areas that take varying amounts of your time, money, and know how. Usually there is a trade-off between time and money, so you can give whatever you have more of.
Your Time Required: Virtually none
Your Money Required: Whatever you want to spend
Your Knowledge Required: Little. A few minutes of research or talking to someone knowledgeable is about all you need.
Return: Small. It usually takes many years of saving and waiting to see results but this is a good place to start and is more secure than the most investments.
Your Time Required: This one is great for people with more time than money as you can get started with little or no money
Your Money Required: If you do have money to invest, there certainly are areas to spend it but it is not required
Your Knowledge Required: The more the better. You can get started with very little knowledge but you will be more successful the more you know about what you are doing
Return: Highly variable. This depends on how much work and money you put into it combined with the right knowledge and skills.
Your Time Required: Depends on how much money you want to spend on it. DIY will save money but cost a lot of time
Your Money Required: A real-estate investment is one of the more pricier investments you can make (think the price of a house)
Your Knowledge Required: Moderate to extensive. You can start without knowing very much but it is advisable to make sure you know what you are doing before you commit to such a large investment. DIY also requires your knowledge and skills
Return: Potentially great. Flipping houses or renting them out can provide a lot of income.
There are many more areas of investment. To start you need to pick one that suits your resources, research it thoroughly, and give it a try. Don't give up entirely if you pick a riskier investment and it doesn't pan out. Learn from it and try it again in a different way, or find something else.
Change your thinking
Many of us were told by our parents when we were young to save our money. If we wanted a candy bar from the store or a new toy we are told to save up for it and buy it when we have the money. Some of us take this advice further and start saving money for the unknown future wants and needs. This is sound advice, and those that take this advice to heart will save themselves a lot of grief throughout their lives by having money saved for hard times and not getting sucked into massive credit card debt. But if this is where the buck stops then the savers will never really achieve success. What is the end goal for the majority of the money we make and save? To buy that candy bar or that new toy. Or as adults, to buy that new phone or TV Following a new purchase is time spent using and taking care of your new toy. Saving alone is good but not great.
Another thing to always remember is that no job is 100% secure. Wouldn't it be nice if you went to work to supplement the income you are earning through your investments instead of the other way around? Diversify your sources of income. That way you will not be ruined if you lose your job. Enjoying your free time and your toys is good and even healthy. Don’t spend 100% of your money and free time on investments. However, we need to change our ideas about our time and money if we are to be free from the financial rat race.