Is Your Home An Asset Or A Liability?
Most Australians go through life thinking that their home is an asset. But this is a big mistake!
A real asset is something that is worth something and also generating you an income. Some examples of real assets are share portfolios that pay dividends and investment properties that have surplus rental income, and perhaps even YOU if you generate an income by working. But does your family home generate an income? No.
In fact, your home is a liability, not an asset. Even once it has been completely paid off, you will still need to pay rates each year (that’s $2,000 on average), insurance (probably totalling $1,000), maintenance, and more. The older a property is, the greater your yearly maintenance costs, as carpets, curtains, and air conditioners need fixing or replacing… the gardens need maintaining, and paint needs a refresh.
If you are pumping all of your earnings into paying off your house (plus all the expenses it generates), instead of acquiring real assets that will produce an income, you’ll end up owning your home but you’ll be stuck working indefinitely to pay for it.
What’s the alternative? Acquire real assets! Instead of focusing on your own home, look at other options like renting the home you live in, and buying an investment property (often this makes more sense financially).
Stop looking at your home as an asset, because this mindset isn’t going to serve you long-term.
If you want to be financially free, you will need to generate a passive income so that you don’t have to keep working. The only way you can do that is with real assets.