Creating Income from Assets

As we discussed in a previous article, our goal is to buy or create assets instead of liabilities to stay ahead financially. To figure out what is an asset, and what is not, we need to gauge how well it does what an asset is supposed to do – put money in your pocket. If it does put money in your pocket, it’s an asset, if it does not, then it is not an asset. Simple enough, right?

Once we have figured out what an asset is, then we must look at the cash flow it generates. This cash flow is the money that goes in our pockets. The assets that we need to focus on in order to create this cash flow can be in any form, but the most common forms of assets are things like properties, financial investments like stocks or businesses or creative endeavors that generate royalties like songs or books.

If an asset does not generate cash flow, it can also generate capital gains. Capital gains are a form of cash flow, except that in comes in a one-time lump sum. Cash flow generally comes in ongoing income, such as a monthly payment that comes in regularly. Capital gains are just as good, especially if the lump sum amount is sufficiently big enough to carry you over for some period of time.

The on thing that you should look for, as someone who wishes to buy or create assets that bring in income, is to look for assets that work hard for you at creating this income. Whether it’s an investment in a business, or a property to rent out, or resell, the basic process is the same – look for assets that will put the most money in your pocket.

Having more money in your pocket will mean more options for you, and that is the definition of freedom for most of us – options to choose what we want to do with our time, with our money and with our lives.