Asset creation is not a distant dream for ordinary people like you and me, anymore.
Yes, you read that right! Indeed, you can build assets with little money. Sadly, only a few people in the world actually know this.
Why is it? For the simple reason that they are unaware of the process of resource building and the many benefits it brings.
We discuss it in detail in this article. Let's begin!
What is Asset Creation?
It is the gradual buying of assets with the goal of accumulating them. The keyword here is 'accumulating'.
Moreover, accumulating without purpose will not help either.
There has to be clarity for doing so.
Now, the question ahead of us is why do so?
What is the need for Asset Creation?
It should thus be done to achieve financial independence.
Do you like your job? I'm sure there are no easy answers for that.
Nonetheless, it puts food on your table and you have no option. Right?
Indeed, necessities of life are to be blamed for this.
So is there a way to get rid of this dependency?
Yes. There is a way. You have to become financially independent.
How do you address it?
Follow these two steps.
1. Accept that you are financially dependent on your job.
This is missing in most people's life.
They don't realize this and hence don't take any action.
2. Once you've realized your limitations, begin reducing your financial dependency slowly.
So how do you do it? By creating an alternative source of your income.
And how do we create it? By accumulating assets over time.
The bigger is your asset base, the more shall be your alternative income.
The moral of the story? Gain more and more assets to free yourselves, from the imprisonment of your job.
Why Alternative Income is considered over Job Income?
You have more control over your alternative income.
Why? Because it is totally related to your asset base.
Moreover, the bigger your asset base, the better your alternate income.
Should alternate income get our priority?
Yes. As has been explained previously, building assets is totally in our capacity.
This poses another question before us, "Why do we need money?".
Simply because it helps us to maintain our standard of living and our expenses.
As a human being, it cannot be compromised.
Thus, to meet this need, we work hard in our jobs.
And the income we receive, helps us meet our expenses.
Here is the catch! Our expenses generally rise with time owing to inflation. Thus, our income must also match this rise for us to cope.
We distinguish between our Job income growth and Alternate income growth hereon,
|Job Income Growth||Alternate Income Growth|
|This income is from your job.||This is based on a fixed math formula, hence certain.|
|The reputation you build leads to a growth in this income.||The bigger is your asset base, the stronger is your passive income stream.|
|However, the reputation building is only partly in your control while other factors too decide this.||It is totally based on your skills in accumulating the assets over time.|
Furthermore, as alternate income growth is under our control, it should be our preference. In the starting years, the alternate income will be low vis a vis your job income.
Don't let it turn you hopeless. As you keep accumulating assets, the returns pick up with time.
How Can Ordinary Investors Build Assets?
The rich will have a different approach to asset creation.
Moreover, ordinary investors should consider the following,
1. SAVING: The most important part of the whole thing is to save money.
The most basic way is to set aside a certain amount. Cut down unnecessary spending.
You can even decide to put standing instructions to your bank to set aside 1/4th of your total income to your saving account at the first of each month.
2. INVESTING: You might be thinking, "Why can't I just keep saving?".
Indeed, saving first and using it to buying assets would be good.
But it is often seen, that savings get spent very easily.
While invested money compounds itself and is much rewarding. Mutual funds, Real Estate, Gold, etc. can be good places to invest.
3. CONSOLIDATING: Mostly, we go till step 2 and stop. But it is always good to make another move.
Here, we turn all our "assets" into "income giving assets".
REITS, Dividend-yielding stocks, etc. are some of the options for this.
We have discussed multiple ways to build assets.
Moreover, it must be remembered here that one must be debt-free (cleared all loans) and have an emergency fund(insurance and hard cash) before they go ahead with this process.
Having done so, it is vital to follow the above-mentioned steps to really set ourselves financially free. Happy investing!