Monday, 29 February 2016

RULE 77: Learn How To Make Your Assets Work For You


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CEO, Skooba Pools Agency, Dr. Oluwafemi Adejuwon James


First off, do you know what assets you have? I mean you to include both long-term assets (fixed assets) and short -term assets (current assets). The fixed assets are the ones it would take you a while to turn into cash and the current assets are the ones easily converted into readies. Have you listed them? If not, do so now. I’ll wait.

Back already? Got your list? I hope it has some of the following on it:
• Property
• Land
• Motor vehicles
• Pension funds
• Cash
• Goodwill
• Works of art, antiques ete.
• Investments
• Money owed
• Furniture and other possessions
• Patents
• Stocks and bonds
• Intellectual properties.
If you have a business it may also include things like:
• Stock
• Work in progress
• Raw materials
• Plant and machinery
• Equipment
• Trade marks
• Mailing lists 

“If you own something, borrow against it to buy more and then borrow against that to expand further. All businesses are expanding or contracting, they are like plants, flourishing and growing or wilting and dying, you choose”.

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Once you start writing it down as a list you begin to see endless possibilities for using assets to make more money. Basically the personal advice is:
Don’t let an asset sit idle - if you own property, rent it out. And I don’t just mean buy-to-let. Some enterprising people have rented garages or small bits of land they don’t use in areas where there isn’t enough parking for commuters and so on. Think laterally and don’t discount anything!
• No asset is beautiful unless it is working for you - it has to be accumulating, increasing in value, to be worth keeping.
• Never leave cash sitting around - it tends to get bored and wander off. Make it work.
And on top of those the business advice is:
• Keep stock and raw materials to a minimum - more is less.
• Depreciation is a dirty word - keep its use to a minimum and then excuse yourself every time you use it. But if you don’t depreciate equipment you are fooling yourself about net worth.
• If you own something, borrow against it to buy more and then borrow against that to expand further. All businesses are expanding or contracting, they are like plants, flourishing and growing or wilting and dying, you choose. (I know I said earlier don’t borrow, but you can borrow against assets - don’t borrow for revenue expenditure.)
• It is a false economy to extend the life of plant or equipment past its safe-to-use date; the legal ramifications are enormous.
• Don’t give more credit than you need to - money owed is money wasted.
• Chase debtors.

From The Book; The Rules of Wealth by Richard Templar
(Read Rule 78 of Rule of Wealth tomorrow on Asabeafrika)

Read-to-Wealth Series

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