The difference between the rich and the wealthy is probably that the first has a lot of money whereas the second has assets. Assets are resources that have economic value and are expected to bring future benefits to their owners. In effect, the process of building assets requires strategy and good timing. 

Cash and cash equivalents make good assets but there are other things like real estate, arts and collectibles, jewelries, bonds, stocks, trademarks, patents and even intellectual properties. Acquiring and possessing these items is what assets building is really all about. 

Before we head off to reveal ways to stack up assets, there’s one thing we must say first. 

Certificates of deposit, stocks, bonds, cash, and the likes make up what is known as financial assets. All of these (except cash) are further tagged as liquid assets because they can be converted into cash. There is another classification of tangible and intangible assets. This covers physical items like real estate, cars, and precious metals as against abstract items like patents and trademarks. 

Every asset whether financial, tangible or intangible, appears to be either an appreciating asset or a depreciating asset. Appreciating assets always increases in value. The reverse is true for depreciation assets. This is the point we are driving at. It explains why wealthy people acquire more assets in houses, businesses, and stocks than assets in cars. 

4 Ways To Build Assets

1. Develop a Savings Culture

A savings culture is what prepares one to take all the necessary steps and, in fact, remain committed towards saving. There is no way to build assets without this. By simply saving money, one can access items like real estate, stocks, and jewellery. This is so much so because cash is generally accepted in exchange for most of the other kinds of assets. Moreover, leaving the purpose of building assets aside, savings come in handy in the case of an emergency. 

In developing a savings culture, you might want to operate a savings account, plan your retirement, plan for emergencies, and thoughtfully analyze the usefulness of every single product and service before purchasing it. 

2. Totally Avoid Debts - The Bad Ones:

Debts are somewhat like financial pits. They are easy to fall into but difficult to get out of. Be that as it may, debts are not always terrible. This brings us to the talk about good debts and bad debts. 

Good debts are simply debts incurred for an income-generating purpose. Loans taken to start or grow a business, and to acquire a skill fall under this category. The reason why good debts are termed “good” is that the loans associated with them are used productively in a way that reduces the financial effect of such debts on the debtor. 

Unlike good debts, however, bad debts do not improve the financial situation of a debtor. It is the kind of debt that entrepreneurs and investors try so hard to avoid. Typical activities like shopping for groceries, paying rent, and handling miscellaneous expenses contribute to building bad debts. For this reason, it is advisable to make a lot of consideration on such activities. 

The scary side to owing debts is that they accumulate in the twinkle of an eye. This might be due to a high interest rate, short maturity time, or poorly documented loan agreements. Whatever the cause, one initial debt usually leads to several others. And if one’s income is not enough to service their debt without the need to borrow more money, everything goes kaboom and they spiral into an endless state of borrowing.

In reality, debts may not directly affect one’s ability to acquire or build assets. So you might wonder what all the clamor is about. Well, the fact is that owing debts typically takes one’s mind off building assets - even if they have the means to. Furthermore, savings which could be used to purchase assets could be diverted into servicing debts. 

3. Start a Business

Businesses are great assets. Take for example, that you’re able to start a talk-of-the-town service with an appealing future prospect. This holds value for you and any other stakeholders. The bigger the business grows, the more its value increases and the more its value increases, the more the business becomes an asset. 

Investors flock towards this kind of success. They offer funding that helps improve the business’ products and services and that also compensates the team. But it doesn’t end there. Assuming you get tired of your business and decide to leave, you have the option of selling it to a new management. Founders of big companies like Uber have taken this approach to rake in profits to the tune of several millions dollars. 

A good way to build assets within the asset of a business is by acquiring patents or trademarks for products. Here’s what it entails:

1. Create a Product

Creating a product helps build assets such as patents and trademarks. A patent keeps others from replicating, selling, and sometimes even using a product, especially a new invention. It gives all the rights of that product to a particular individual which is usually its creator. 

The value of a patent is in the fact that you can produce and sell your new product - and be the only one doing so. Every customer that is interested in your product would have to buy it from you. This could mean a lot of money. Patents could also be used as collateral for bank transactions. And if all of these don't interest you, you can license your patent to an entrepreneur who is ready to pay royalty and other fees out of the profit they make from selling the product. 

Arm Limited, a company that operates majorly by licensing its product patents, demonstrates the profitability of the practice with a reported revenue totaling $719 million for Q1 2022 fiscal year. 

4. Become an Investor

As we mentioned earlier, investors are attracted to businesses. In addition to this, they build assets in stocks, real estate, arts and collectibles, and just about anything. Becoming an investor is, therefore, a good way to approach asset building. It allows you to spend time on finding valuable projects and properties to acquire or invest in rather than taking pains to build those projects or properties yourself.

Conclusion on 4 ways to build assets

By now you must know that there are different kinds of assets. Some of them keep gaining value while others keep losing value. So, to make the most of building assets, it is important to acquire appreciating assets. The entire process of building assets can last a whole lifetime. What this means is that it is never too early and also never late to begin. And if the process seems too hectic, Epirus Ventures is always open to assist you. 

‍