An example of a personal asset is an expensive car.
A personal possession is something of value that belongs to a few. A classic example of a personal possession is a house, but personal possessions can take a wide variety of forms. The value of personal assets is often taken into account when people apply for loans or other forms of financial assistance and when an individual’s net worth is calculated. Many people are surprised at the total value of their personal assets when added up.
Many personal possessions can be quickly converted into cash.
Financial accounts such as checking, savings and retirement accounts are all personal assets, as are instruments such as life insurance policies that have a cash value, even if that value is not accessible. The real estate market is another example of a personal asset as well as a business, along with things like cars, electronics and art collections, antiques and other valuables.
The real estate market is an example of personal good.
There are two ways to determine the value of personal property. The first is to look at market value, the amount these items would earn if they were sold on the open market. The second is to look at appraised value, a value that is often significantly higher because it is based on an item’s potential future selling price. The difference between these values can be very important, especially when people are doing things like insuring personal property, as people are usually required to insure the appraised value, not the market value, which means they will pay more in insurance.
Learning to manage personal assets is an important part of managing your overall financial situation. Personal assets can be a liability or a genuine asset, depending on how they are treated and cared for, and developing an asset allocation strategy is very important. For example, placing most of your personal assets in a single location or account is generally not advisable because it exposes people to greater risk. Likewise, failing to properly care for an art collection can cause its value to decline.
Assets can also generate revenue. Real estate, for example, is personal property that can be rented or leased, while bank accounts can earn interest. People should be careful to control income from personal assets because this income is considered taxable and there can be government penalties if the income is not properly tracked and declared in tax documents. It is also important for people who want to increase their overall wealth to learn how to manage assets so that they generate more income.