Knowing your asset is crucial in financial planning. When you are trying to make sense of your net worth, it is important to know what assets to include in your records. It can be anything that you own and has cash value or it can be converted to cash.
An asset is anything that you own
You can consider something an asset if it is anything that you personally own. A property that you are about to inherit can only be part of your asset if it’s already handed to you legally.
It should be either in the form of cash (such as coins and bills), or can be converted to one if you were to put it up for sale or exchange. For instance, a piece of land that you own can be part of your net worth because it has cash value should you decide to sell it.
What are the different types of asset?
There are various types of an asset, including
- bank accounts
- lifestyle assets
- valuable belongings
- real estate
Cash is the simplest form of asset. It is money found in your pockets, wallet or a piggy bank. In most personal statements of net worth, it accounts for little because it is expected that what you carry around with you is only for your immediate expenses. Bringing too large an amount may be unsafe or can be difficult to manage.
2. Bank accounts
Bank accounts are deposits that you have in any banks, such as the available balance contained in your ATM/passbook savings account, checking accounts or time deposit accounts. You can also included any checks that have not yet been cashed yet. Their value can be withdrawn either right away or upon maturity, such as in the case of a time-deposit.
3. Lifestyle assets
A lifestyle asset is anything that you own that becomes part of your daily living. Examples are computers, laptops, mobile phones and other gadgets. You can also include contents of your home: household electrical appliances (TV, home entertainment system) and pieces of valuable furniture. They also include motor vehicles, like motorcycles and cars.
4. Valuable belongings
Possessions that have cash value are pieces of jewelry, precious stones and metals, collectible items such as paintings, stamps and old coins, patents, and creative works such as a painting or a song.
5. Real estate
As you may already know, real estate is any piece of land or structure built on it like buildings and apartments. Its value is dependent on many things, such as location, desirability and ability to earn an income, such as the case of a rental property.
An example of a real estate is your residence, vacation home or a condo available for rent. Other examples are written evidences that someone or an institution owes you money, such as owning a government-issued bond.
A business enterprise that you own is also an asset. Its value can be estimated from its entire worth should it be put up for sale, including its tangible properties like office supplies and intangible ones such as its branding.
Securities are also called paper assets. They are written on paper or most of the time electronically, and their value can be realized when you sell them or upon maturity. Examples of securities are those that are proof of ownership of a company such as stocks. A few types are managed funds like mutual fund, unit-investment trust fund (UITF) accounts, variable universal life (VUL) policy, and direct shares from publicly-listed companies such as Jollibee Foods Corporation and Metropolitan Bank and Trust Company (Metrobank).