📈Mindset Shift #6: Understand What a ‘REAL Asset’ Is

Welcome to the sixth instalment of our Mindset Shift series! Today, we’re challenging conventional notions of assets and liabilities, and uncovering the true meaning of a ‘real asset’ in the context of wealth creation.

Growing up, we’re often taught to categorise our possessions based on their monetary value – cars, homes, and personal belongings are typically deemed assets, while loans and debts are labeled liabilities. However, this conventional wisdom fails to capture the essence of true wealth-building assets.

A true asset is not merely something of value; it’s an asset that appreciates in value over time and generates passive income. So, ask yourself this: if the possessions you own are depreciating in value and draining your finances, are they truly assets?

Consider the example of a car – while it may hold some initial value, it depreciates over time and incurs ongoing expenses without generating any income. Similarly, your primary residence, while it may appreciate in value, does not produce income and requires ongoing maintenance costs, making it more of a liability than an asset.

So, what qualifies as a real asset?

• An investment property, for instance, not only appreciates in value but also generates rental income, providing you with a steady stream of passive income.
• Businesses and shares that pay dividends are also considered real assets, as they offer both capital appreciation and income generation potential.

Now, here’s your homework: challenge the conventional wisdom by asking your peers how they define wealth creation. You’ll likely encounter responses like “winning the lottery” or “robbing a bank” – indicative of a lack of financial literacy. The real path to wealth lies in acquiring a portfolio of real assets that grow in value and produce passive income.

In conclusion, it’s time to reframe our understanding of assets and liabilities. By prioritising investments that appreciate in value and generate income, you can build a solid foundation for long-term financial success.

Stay tuned for the next instalment in our Mindset Shift series, where we’ll continue to challenge conventional wisdom and empower you with the knowledge to achieve financial freedom.

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•  Integrity Team