What Are Assets?

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Types of assets
- Cash and cash equivalents: The money that’s in your pockets or stored in a savings account, checking account, certificate of deposit or other account.
- Tangible assets: These are physical objects, or the assets you can touch. Examples include your home, business property, car, boat, art and jewelry.
- Intangible assets: The nonphysical assets like stocks, bonds, pensions and royalties
- Liquid assets: Liquid assets are cash or the things that can be sold and converted to cash quickly, like readily tradable stocks and bonds. Selling these assets generally does not affect their price. Liquid assets are also used to determine whether or not a person is classified as a high net worth individual.
- Illiquid or fixed assets: Sometimes referred to as “fixed assets,” illiquid assets usually take longer to convert into cash, and their value may change in the process. Real estate, furniture and antiques are all considered illiquid or fixed assets.
- Fixed-income assets: Investment money that is lent for interest, including government bonds, certificates of deposit and securities.
- Equity assets: Your ownership interests in a company, like stocks, mutual funds and retirement accounts.
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Why assets matter
- Net worth: Again, your net worth helps shape your financial health. You can calculate your net worth by subtracting your liabilities (what you owe, or debts) from your assets (what you own).
- Insurance: You’ll need to know how much certain assets, like houses and jewelry, are worth to get them properly insured. Insurance gives you coverage in case of an event like a fire, flood or robbery, or potential liability, say if you’re sued after a car accident. Another asset people tend to overlook is their ability to earn an income. Consider protecting your livelihood with disability insurance.
- Loan applications: Liquid assets are often part of what lenders look at when you apply for a mortgage, car loan or home equity loan. You may get lower rates or better terms if you have funds to fall back on to quickly make loan payments if you lose your job.
- Collateral: Some lenders require you to put your house or car up as collateral to receive a loan. If you do not repay the loan, these items may be seized to help cover the cost.
- Divorce: Your money and possessions may be divided up with your ex-spouse during a divorce.
- Bankruptcy: There’s a possibility that you’ll have to give up some assets, like jewelry or a car, if you file for bankruptcy.
- Retirement: Having a stockpile of liquid assets is crucial when you’re retired. It’s best to have money readily available to cover living expenses when you no longer receive a paycheck. Make sure to account for taxes when converting your assets to cash.