My friend, mystified, asked me - "But, what is an asset?" And frankly, I can tell she does not know. (Not Chloe.)
How can I tell she does not know? Because she is still trading her personal time for dollars. That's how I can tell. Additionally, she has no plans not to trade her personal time for dollars.
The irony here is, that this woman works a LOT harder than I do- but I make a LOT more than she does- in my pajamas.
I am not being arrogant. I have simply educated myself on what the right things to know are; and did more of that- and what the bad things are- and did less of that!
"Assets": Assets pay you. They always pay you. You can tell if you have an asset because money is right behind one of those.
Example: Say, for instance, you buy a home entertainment system- a surround sound system. What is that? Is that an asset or a liability?
Well, it's a liability. Why? Because no one is going to pay you to have it in your possession.
BUT, let's say you charged all your neighbors to come over and see some NFL games- your neighbors paid a fee to sit in your cushy stadium seats, have a beer or two and enjoy the game?
Now what do you have?
You have an asset.
What if you like snow cones?
You go to the snow cone shop and say, "I'd like Tutti-Fruiti, please." What's your snow cone? Is it an asset or a liability?
A liability. No one paid you to get it, or to eat it.
BUT, what if you bought one of those snow cone, cute little houses that sit in front of other stores- usually in parking lots?
NOW, what do you have?
An asset. People are going to pay YOU to eat snow cones!
I look at every single thing I do through the lense of "is it an asset or a liability"?
So, Entrepreneur Chick's wealthy friend, "M" is talking to another wealthy friend and "M" asks, "What kind of stuff are you investing in these days?"
Friend says- "Well, you won't believe it. You know those snow cone houses?"
"Those daggummed things make 100K a year a piece! Did you know that? I have a slew of those things."
SnowconeDUDE knows what an asset is; even it it's not too glamorous.
(More tomorrow about types of assets.)