Personal financial assets are things of value owned by an individual which hold monetary value. Personal assets are considered when you want to apply for a loan through the bank. A person’s wealth can be determined by the total number of money and the value of a property that belongs to them.
Understanding Assets
Assets can either be tangible or intangible. Some of the items that could be regarded as personal assets include electronics, antiques, jewelry, art collections, and other valuable items. One should take care of these assets well; otherwise, they may be a liability. They can also generate an income for their owners.
Other common personal financial assets are cash accounts, land, buildings, houses, and cars. A real estate’s value is dubbed equity. Therefore the equity of a house is the value of the house minus the mortgage on the house.The value of assets such as jewelry, antiques, cars, and electronics are difficult to work out since they may sell for more or less than what an authenticator values.
Financial Investments
Financial investments such as stocks, treasury bills, bonds, pensions, and life insurance policies are also considered personal financial assets.Assets are a way of building wealth since you acquire valuable items over time. You can always sell them and get cash at hand. Businesses and people who manage their assets handle their assets differently.
Most individuals acquire assets to create wealth as they await retirement or use them as a resource financially. Companies, however, have assets to show that they can use the valuable items to develop and support growth in the business. Still, sometimes, due to depreciation recapture, the value of some assets may reduce.
Your Net Worth
Personal financial assets are also used to calculate your net worth. The formula asset minus liabilities is used in calculating your net worth in which asses are what you own, and liabilities are arrears and other financial obligations. Knowing the value of your assets is essential to know your net worth.
It is important always to have a positive net worth and track how it is constantly changing, and this will help manage your debts and make decisions concerning investing long-term. Knowing your net worth also helps you plan your retirement and apply for loans.
It would be best if you always protected your assets, and the best way to do this is by creating a legal entity. Your business and assets are open to lawsuits without a legal entity, as your business will be seen as a sole proprietorship. One can use personal financial assets to offset debts related to business in a lawsuit, which is why it is necessary to protect them.
Personal assets can be listed electronically using a spreadsheet or any other program. Listing assets electronically makes it easier when one needs to update them. When making a list, you should include personal information specific to each asset so that it helps link the assets to you in the documentation.
Organization Is Important
This personal information comprises email account information, profiles, executors of a will, bill passwords, and other assets-related websites. These personal details are very important and should be organized to be easily found when need be. Also, you should include details about insurance policies, title deeds, and the individuals authorized to manage these assets.
It is best to always prepare for an emergency as this will go a long way in keeping your assets safe. Most people tend to list family or friends who are authorized to manage the assets in the list. Information that proves ownership, such as receipts and deeds, should be properly maintained and have multiple copies by scanning them.
Know What You Have
Knowing your financial assets and their values is essential regardless of your financial goal. This information is important since it is used to put a figure on your net worth and can be converted to cash. Therefore it is important to list the current assets and determine their value. It is also important to protect your assets as they are vulnerable to lawsuits. If used to pay off your debts and liabilities of your business, you could be left bankrupt.
Listing assets and protecting the said list is also very crucial. The list usually has very personal and important information that could land in the wrong hands. Ensure to authorize someone you trust to handle the assets on your list in case of any emergency. The process of listing and protecting the list by authorizing and having all documents that prove ownership maintained should be done with the help of a lawyer.
