If you are in Finance or ever read Rich Dad, Poor Dad – you are probably familiar with the concept of Assets.
A famous quote from the book is ‘You must learn the difference between an asset and a liability—and buy assets.’
So what are Assets ?
It’s anything you own that can help generate more economic benefit to you.
What does that economic benefit even mean? So here are 5 types of economic benefit & it’s worth spending money on anything that :
1. Saves you time
‘Time is money’.
Think about the developments over the course of civilisation, we are constantly trying to make processes and equipments more efficient to free up our time to do something more value adding. Imagine you are running your own business, you could easily do all the accounting yourself to save money, but there is a cost to your time. Time spent on accounting, is time away from thinking about strategies to improve your business. Or maybe think about your everyday life, imagine if you took the public transport daily and it takes you twice as long to get home.
So buying something like a car – that can reduce time spent on the road, or outsourcing a job so you can spend your time more meaningfully is always worth spending money on.
2. Makes you more effective
‘The best investment you can make is in yourself’.
A good example of money well spent is spending it to upskill yourself. Perhaps this skill can help better you as a person, help advance your career or side hustle. After all knowledge is power, and the more you know, the more effective you can be. Apart from courses, it could be investing in a good quality laptop, with the functionalities and speed that allows you to be more productive in performing your daily task or in a planner so you can manage your time better, headphones so you can focus better if you live in a noisy place and the list goes on!
3. Makes the process easier
‘Remove friction associated with good behaviors. When friction is low, habits are easy. Increase the friction associated with bad behaviors. When friction is high, bad habits are difficult.’ – this is a quote from one of my favourite books – Atomic Habits from James Clear.
I love that we live in the 21st century with tons of technology that can make our lives easier. I recently purchased a cordless vacuum and I absolutely LOVE IT. For the longest time I was using my clunky old vacuum and cleaning felt like a chore mainly cause it was so bulky, wire management is annoying and it wasn’t very versatile so I couldn’t reach some tight spots. In other words, the friction to cleaning was just too high. When I finally used the cordless vacuum, the process was so seamless that I was vacuuming at every opportunity I had! So reflect on the habits that you are trying to build, is it reading ? Maybe it’s time to purchase an e-reader? Is cooking too time consuming? maybe it’s time to invest in a fast cooker? If a tool can enable you to build good habits to live a better life, it’s well worth it.
4. Saves you money in the long run
‘Save money and money will save you’
If you have recently started on your personal finance journey, been budgeting and looking to cut back on your expenses, look into your current lifestyle and assess if there are any tools you can purchase that can save you money in the long run.
A good example of this is a coffee machine/ french press. If you are a coffee lover like I am and can’t possibly function in the morning without it, it’s an absolute investment! Instead of paying through your nose for takeaway coffee, invest in a good coffee machine that can give you that caffeine boost at half the cost. Maybe you pay for a gym membership but only use it half the time, get a home gym instead or a treadmill so you can run while watching your favourite TV shows, all in the comfort of your own home.
5. Gives you a peace of mind
‘If money can fix the problem, then it really isn’t a problem’.
I’m not suggesting that you should start splurging money unnecessarily but if an issue is causing you so much anguish, then perhaps spending a little more is well worth it. I was recently in a situation where I felt my living condition was no longer serving me and considering I spent so much time working from home, I felt it was better for my mental health to move out. Even though it was more expensive, it was well worth it.
Another example of a purchase would be insurance policies. Yes you are well now but if shit hits the fan, it gives you a peace of mind to know you are well insured, you don’t have to burden your family to fork out tons of money for you. And THAT is priceless.
Admittedly, many products these days boast the above benefits so in order to know if a purchase would be an asset to you, requires the awareness of:
1. Will this product take you from a 0 to a 1? Or just marginally and incrementally better ? (Ie. Do you have any existing products that provide similar benefits)
2. Your own lifestyle preferences and motivations (eg. Do you drink coffee for the caffeine kick or is the joy in the purchase of entering Starbucks as a reward to self for going to work?)
3. Your own grander goals, be it financial or general for your life (eg what are you saving time, being more productive for? Is it just so you can watch more netflix or so you can spend more time bonding with your family)
The above considerations are by no means exhaustive but hope it gets you thinking on your own purchasing habits!