Financial Terms / A - B / Asset

Asset

What is an asset?

An asset is anything that has value and can be converted into cash. The most common assets are savings accounts, stocks, bonds, cryptocurrency and real estate. But there are other, less obvious assets, like your 401(k) or your life insurance policy. In personal finance, the goal is to have more assets than liabilities. That's because assets can be used to offset liabilities in the event of an emergency.

What are the different types of assets?

There are two main types of assets: physical assets and financial assets. Physical assets are things like your car or your house. Financial assets are things like savings accounts, stocks, and bonds.

Both types of assets are important, but financial assets are usually more important when it comes to personal finance because they can be easily converted into cash. That's why it's so important to have an emergency fund in case you lose your job or have unexpected medical bills.

How do I build assets?

There are a few different ways to build assets. The most common way is to save money. You can do this by setting aside money each month in a savings account or investing in a retirement account like a 401(k) or IRA. Another way to build assets is to invest in property or other physical assets that will appreciate over time. For example, buying a fixer-upper home and renovating it can increase the value of the property and create equity that can be used in the future.