Our Assets.

Our Assets - Money Matters.

The word 'Asset' is used in many sense. When we say "Our Assets", we mean every tangible thing we own which has some monetary value. This will include any property that we own like our house, a car, gold ornaments and so on. We also use this word to describe human beings. For example, we say that a skilled employee is an asset for a company. We may also use this word to refer a product, like: 'This machine is an asset for us'. The most common meaning of asset is anything which has a value.

The subject of asset and asset management is vast and it includes complex studies related to material wealth of individuals and organisations. In this post, we will discuss assets belonging to individuals.

Kinds of Assets.

We may have many kinds of assets, most of them will be movable and some will be immovable. The movable assets are those that could be taken from one place to another, like money, ornaments, vehicles and so on. The immovable assets are those which are fixed at a location and could not be moved. These are a house, land, building, an office, a shop, hotel and restaurant, a factory etc.

Value of Assets.

Assets have value based on its condition, utility and its significance. Almost every item we purchase has a value. The price we pay to purchase something is considered its value. To say this in other words, the value of an item is denoted by its price. The more price we pay to purchase something, the more valuable it is.

As every asset has a value which is measurable, it contributes to the overall wealth that we possess. To give an example, let's say, we own a house and a car which are the most valuable among our properties. We also have a television, a computer, a refrigerator, a washing machine, sofas, table and chairs, shelf and cupboards, a bicycle, a smartphone, some expensive books, two cots, many kinds of utensils and many clothing. All of these are assets because they have a specific utility. We have purchased them by paying money and so they have value. Each and every item has its purpose and has a value.

The Concept of Value.

As mentioned earlier, the value of any asset is based on its condition and its utility and significance. The utility and significance of an asset is judged purely by the person who own's it. It is based on the perception of the owner. Whatever be the condition of the asset, if the owner perceives it to be valuable for him, then the asset has value. If the owner thinks that the asset is no more valuable, then its value becomes less or nil.

Some goods are valuable only for the person to whom it belongs. Clothes are an example for this. Our clothes are valuable for us and not for others. Clothes are personal products and the person who buys them values them. Nobody will see our clothes as valuable for them. We can give our clothes to somebody but cannot sell it because nobody will ever buy used clothes.

Value has a lot to do with perception and it may vary from person to person. Value of an object or an asset based on perceptions may or may not reflect its true price.

Monetary Value of Assets.

Assets have monetary value. They can be sold for a price. The price can be fixed by the owner if he wants to sell them. However, the price has to be legitimate and reasonable for the buyer to buy it. The buyer should be able to see the asset as valuable for him. If the buyer thinks that the asset is useful in some form but not too important, then he may bargain against the price. On the other hand, if the buyer considers the asset as very much valuable, he may buy it by paying the price the owner demands.

Depreciation in Value.

Assets don't retain their value for ever. Their value reduces with time. The utility of a product or item diminish with time and so do its significance. The wear and tear caused due to frequent use and due to changes in weather contribute a lot in reducing the value of assets.

If an asset is not worn out or is not affected by external environment, even then time takes a toll on its value. An asset may be in good condition but if it is old, then it may not retain its value and so its price. An automobile is an example for this. A seven year old car which looks very old and worn and has been driven for around 80,000 Kms. cannot be sold for much money. If there is another car of the same brand which is also seven years old but looks new as it was driven for just 5,000 Kms. could be sold for a higher price, but that price won't be too high either because time contributes to its depreciation.

Evaluation of Assets.

An evaluation of our assets is necessary to get an idea about its present value. As value of assets reduces with time, it is always good to have an idea about its present value. Usually, the valuation of a property is done for mortgaging or before selling it to get an idea about the price to be fixed for it. Valuation needs expertise. There are some technicalities involved in it. A person who is an expert in assessing the value of properties is known as an evaluator.

The evaluation of assets should be accurate. Overestimation and underestimation are equally harmful. While overestimation is not fair, underestimating the value of an asset leads to loss if we sell it. This is a mistake most people make while selling property in a haste. The reason for this could be lack of knowledge or awareness about the book value or the market value of assets.

Maintaining Assets.

Assets are valuable and they need protection and care. If we don't take proper care of our assets, they get ruined. Assets could be surrounded by many harmful elements of the environment which, if not checked periodically, may cause grave damage. Environmental changes like heavy rain, cyclone, lightening or thunderstorms could affect our properties adversely. Living organisms like termites and other parasites too cause irreparable damage to properties. Therefore, we should take measures to safeguard our assets. Assets retain their value when they are in good condition. Maintenance of assets is very important to retain their value for a long time.

Managing Assets.

Asset management is important for increasing wealth. To make a list of every asset that we have is the first step we have to take to manage our assets. By making a list, we can easily segregate assets into classes based on value. We will get an idea about the number of valuable assets that we have and those that have a lesser value. This will help us to evaluate out properties or assets better.

Our properties will be called an asset only when they have a value. Those items which does not have any material value cannot be called an asset. Therefore, it is imperative to include only those things which have value while preparing our list of assets. In short, this would mean that we have to prepare the list considering the monetary value only, that is, the price that can be gained by selling them.

Money as an Asset.

We have discussed assets in general and now we will discuss about money which is an important and precious asset. Money has great value and so it is an asset. There are dedicated organisations and people who work hard to manage this precious asset. As a matter of fact, every organisation and everybody who knows the importance of money is trying to manage this asset in every possible way.

There are organisations which are solely managing money. They are known as Asset Management Companies. They provide services to people in managing their money. The asset management companies manage money through Mutual Funds.

Our assets are our wealth. Wealth is always valuable and so should be protected properly. Generating wealth is difficult and therefore whatever assets we have should be well cared for to make future secure.

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The previous post was "About Debts".

The next post is "About Loans".

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