Don't save money, buy assets!

Please note, I am not giving investment advice. This is only based on my personal experience. Investing in anything is a risky venture and you can lose money, please do your own due diligence before investing in anything.

Saving money sucks. Why save for a rainy day when that money is burning a hole in my pocket right now! Americans have become very good and not doing things they don’t enjoy, like saving. Our national savings rate has been negative since 2005 and it doesn’t appear to be showing any signs of improving.

So, instead of going out and spending your hard earned money on a bunch of depreciating crap that isn’t going to be worth diddily in 5 years (please see my previous post on the worst “investment” you can ever make)…why not use your money to buy assets?

Now, it’s important to understand what an asset is so you know one when you see one. Here are two questions you have to ask before determining whether or not something is an asset.

1. Does this item produce a steady income?
2. Does this item have the potential to increase in value over time?

If you can answer yes to either of these questions, you are looking at an asset.

Please note that buying assets is risky, but isn’t that the case with just about everything you do? It’s so funny to see people so worried about their small IRA account losing 10% in value (so they keep it in a money market) yet they go out and buy a brand new car every 3 years.

So, is a car an asset? Some might say that you need a car in order to get to your job, so a car is an asset based on question number 1. Unfortunately, this is not true. If you run your own business, a car is a liability. It is an expense which subtracts from your income. A car also does not increase in value over time (except in the case of collectables, I will talk about that in a minute).

Stocks and bonds are certainly the most common examples of assets. They both can earn income (stocks pay dividends and bonds pay interest) and they both have the potential to increase in value over time (bonds tend to appreciate when interest rates are falling, stocks tend to appreciate when economic conditions are improving).

Here are some other examples of assets:

Commodities
Foreign Currencies
Collectables
Precious Metals (gold and silver)
Bank accounts
Real Estate
Your Own Small Business

Here are things that you may think are assets but they are not
Automobiles, motorcycles, RVs, ATVs, etc.
Anything technology
Clothes and Shoes
Furniture
Jewelry (other than the metal weight)
Home décor

Keep in mind with all assets there are different degrees of risk and liquidity. Likewise, not all assets are good buys at the same time. Real estate has been a great investment in the past. I wouldn't go near real estate right now (for reasons I will post later).

However, if you take part of your income and devote it to buying assets, long term you will be in better shape that those fools who spend all their money on all those depreciating trinkets that make them think they're rich.