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What are Assets?


What are assets?


Assets are items that someone owns and has monetary value.


The first step in creating a net worth statement is to list all assets at fair market value. Fair market value is the amount an asset will sell for in the open market. Types of assets include liquid assets, investments, real property, and personal property.


Liquid assets


A liquid asset can be quickly and conveniently converted to cash. For those most part, this includes cash found in checking, savings, certificates of deposit that will mature within a year, and money market accounts.


Investments


An investment is an asset acquired to build wealth, earn income, or accomplish other financial goals. Investments in this category primarily include stocks, bonds, mutual funds, or other types of investment funds. Retirement accounts, the cash value of pension funds and life insurance are also included in this category.


Real property


Real property is an asset that is tangible and permanently fixed, meaning that one is unable to move the asset. Real property includes land and any significant structure, like a house, attached to it.


Personal property


Personal property is an asset that is tangible but not permanently fixed, meaning that one is able to move the asset. Examples of personal property include automobiles, boats, jewelry, furniture, or other movable items of value.


It is important to note that an asset is not guaranteed to increase in value. In normal situations, assets with motors, like cars, decrease in value over time.


Knowing the total value of your assets is the first step to determining your net worth. Net worth is your assets minus your liabilities.

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