Personal Finance
What Is an Asset?
An asset is anything you own that holds monetary value. That means things like your house, your car, and your checking account funds are considered assets.1
Knowledge of your assets and their value is key to understanding your net worth, which in turn is helpful for many things, such as taking out a loan, budgeting, and estate planning. Learn more about types of assets, below.
Personal assets vs. business assets
An asset can refer to something with monetary value that’s owned by an individual or a business. Here’s how the two compare:
Personal assets
Personal assets are anything belonging to an individual or household that can provide current or future financial value. They include everything from real estate to cash to investment accounts.
They’re typically used to help measure a person’s wealth and can be helpful when applying for a loan or planning for retirement. Personal assets give an individual a clear picture of what they own and the value.
Business assets
Business assets are anything owned by a company that can provide financial gain or boost the organization’s value. Similar to individuals, businesses own physical assets with monetary value, like real estate or bank accounts. But they also own non-physical assets that most individuals don’t own, like intellectual property or business relationships. A business’s assets are used to determine a company’s value and can increase its marketability.
Understanding business assets can help you as an individual if you have your own business or even a side hustle and need to account for those assets in your estate planning.
Types of assets and examples
When it comes to assets, the most common types are tangible and intangible, and liquid and illiquid (aka, fixed) assets.
Tangible vs. intangible assets
Simply put, tangible assets can be physically touched.
Tangible asset examples:
- Cash
- Jewelry
- Real estate
- Vehicles and machinery
- Furniture
Intangible assets, on the other hand, refer to things that are not physical.
Intangible asset examples:
- Intellectual property
- Patents and copyrights
- Licenses
- Royalties
- Research
- Social media accounts
- Computer software and apps
Intangible assets typically are more applicable to businesses, but they can also be owned by individuals. By knowing and identifying what your intangible assets are, you can better estimate your future value or worth.
Liquid assets vs. illiquid (fixed) assets
Liquid assets are any that can easily be converted into cash in a short amount of time. These assets are sometimes simply referred to as cash, or cash equivalents.
Liquid asset examples:
- Cash and bank accounts (checking and savings)
- Money market funds
- Mutual funds
- Stocks and bonds
- Treasury bills and notes
- Certificates of deposit (CD)
Illiquid or fixed assets, meanwhile, are those that can’t be quickly converted into cash. They may be used to generate future income.
Illiquid (fixed) asset examples:
- Real estate and land
- Retirement accounts
- Tools
- Vehicles
- Furniture
- Jewelry
- Art collection
Assets vs. liabilities
Liabilities are any debts you owe. These can be to individuals, businesses, or even organizations, like the government (think taxes). Other examples of personal liabilities could include credit card balances, loans, and mortgages.
When it comes to gains and losses, it may be a good idea to keep track of your assets and liabilities on a personal balance sheet. A personal balance sheet provides a snapshot of how you’re doing financially.
Understanding the relationship between assets and liabilities is a vital part of building wealth and having financial security.
Assets: The bottom line
Assets refer to anything owned by an individual or organization that has monetary value. They can be broken up into a number of asset types, all of which contribute to an organization’s or individual’s overall value.