BLACK MILLIONAIRE TERMS of the WEEK:
To best enable you to engage your children in this discussion, we’re going to start with some basics.
This week’s terms of the week is Asset.
Now, in a previous post, several weeks ago, we defined the term “asset.” However, in light of the point that William R. Patterson made in this week’s episode of the Raising Black Millionaires Podcast, I think it‘s important to go a bit deeper into the term and its meaning.
For those of you who haven’t yet heard that episode, just click the hyperlink for the podcast in the previous sentence. Nonetheless, one of the most awe-striking points Mr. Patterson made when he talked about money management in his parents’ household when he was coming up was the fact that his mother did a good job managing the household income, but she didn’t know much about acquiring assets to make their income grow. With that, it’s important for us to spend some time digging into the topic of assets so that we may all be found acquiring them and teaching our children to do the same.
While I think _for the sake of getting our people to quickly grasp the concept and focus on attaining assets_ the simplified definition of an asset being any possession that generates positive cashflow, is absolutely essential. However, what Mr. Patterson mentioned in our talk makes it clear that we should check out a couple of other definitions to gain a deeper understanding.
BusinessDictionary.com defines an asset as “1. Something valuable that an entity owns, benefits from, or has use of, in generating income.
2. Accounting: Something that an entity has acquired or purchased, and that has money value (its cost, book value, market value, or residual value). An asset can be (1) something physical, such as cash, machinery, inventory, land and building, (2) an enforceable claim against others, such as accounts receivable, (3) right, such as copyright, patent, trademark, or (4) an assumption, such as goodwill. Assets shown on their owner’s balance sheet are usually classified according to the ease with which they can be converted into cash.“
Investopdia.com defines an asset as “a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Assets are reported on a company’s balance sheet, and they are bought or created to increase the value of a firm or benefit the firm’s operations. An asset can be thought of as something that in the future can generate cash flow, reduce expenses, improve sales, regardless of whether it’s a company’s manufacturing equipment or a patent on a particular technology.“
While there are many definitions for the term, these definitions adequatelyaddress the utility most required for our talk. And I don’t know if you picked up on it, but both definitions imply that assets can be owned by individuals; but, they both seem to emphasize ownership by a company. There’s a reason for this.
The vast majority of us have no idea that when we acquire assets in our own names versus the name of a business we own, we open ourselves up to significant liability and tax disadvantages. So, the moral of this part of the story is to build assets and protect your assets through starting a business (in reverse order).
It’s important to note that there will always be layers to the terms we will discuss in our weekly sessions, so it’s always a good idea to do a little more independent study on these topics. Nonetheless, my job is to bring you closer in familiarity with these concepts to lessen our intimidation levels and give our children the financial education and advantages they’re not getting at school.
Be sure to tune into the Raising Black Millionaires Podcast every Monday and checkout our weekly blog posts, where we will discuss these terms in far more depth, providing you far more leverage to utilize them to aid you in your journeys of #RaisingBlackMillionaires!
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In the next few weeks, we’re going to cover other types of assets to better enable us to become familiar with the different ways we may build assets, and ultimately, additional revenue streams through those different assets.
Until next Wednesday, PEACE!