June 14, 2013
Increasing appreciating assets and decreasing depreciating assets (wisely) can produce wealth. How?
Increasing appreciating assets and decreasing depreciating assets (wisely) can produce wealth. How?
Increasing appreciating assets can produce wealth. A college education, for example, will allow a person to make much more than if they graduated from high school and then didn’t educate themselves further. Decreasing depreciating assets can also produce wealth. Vehicles, for example, lose value immediately and cost a lot to maintain (gas, insurance, oil changes, registration, etc.). Buying depreciating assets on credit will only make the situation worse.
Nice job, Katherine. Appreciating assets (stocks, bonds, real estate, a business, and yes, an education for YOU) produce value over time. The investment makes money beyond what it cost. That is a BIG deal, but it must be done wisely. This means focusing on costs as you take on that investment.
Depreciating assets simply make you poorer the moment after you bought them. Most “stuff” in the real world are depreciating assets, and just as Katherine stated, “stuff” accompanied with debt will make the situation that much worse. What does a person do?
Focus on saving/investing consistently each and every month in no-load index mutual funds that own stocks, bonds, and real estate. Consider a business that provides you the opportunity to do what you love. Consider an educational loan that will provide you greater returns down the road. On the other hand, you just have to reduce how many depreciating assets you purchase AND that means buying them AFTER you have purchased your appreciating assets and ONLY buy them with cash. Your financial future will thank you!