Assets can grow your wealth
Obtaining the right assets can increase your wealth.
05:49 08 January 2014
One of the first things that people need to think about when purchasing or obtaining assets is something called opportunity cost. This is the cost difference between the option you decided on and the best available option.
Consider the following example of opportunity cost.
You are looking at ways to advance in your job. Obtaining a Master’s degree in business administration or MBA may provide you with just the boost you need. The question is whether or not the benefits of obtaining a MBA would compensate for what you would lose to obtain it. You would need to take a year off from work to attend University. Is the potential going to be great enough, the reward great enough, to justify taking the time off. If the answer is no then there may be a better option. For example, you may want to consider a program that offers evening or online courses. This would allow you to maintain your current employment while training for a better opportunity. The concept works for assets as well.
- Asset Management – We are often faced with the challenge of purchasing decisions. Managing assets means that each purchase decision needs to be considered. You also need to know the asset type. For example, you may not need to pay as much attention to food shopping or your smaller normal household utility bill however, larger purchases such as purchasing property or luxury cars should be thoroughly considered. Putting a good chunk of money into a car which loses value the minute it is purchased may not be a very good idea, if luxury is not of prime importance to you. As an alternative, you can think about placing your funds in an Individual Saving Accounts (ISA).
- The logical solution would be to purchase a used vehicle that is well maintained and functional. The remaining balance would be placed into the ISA. A new car does have some bragging value but little else and ISA generates a return and therefore increases in value.
Making these types of decisions regarding assets is what can make or break your wealth.