This article describes my family’s assets and liabilities which are two major components of every Balance Sheet.
The real long-term wealth has always been generated and stored in two major assets – businesses and real estate. And the reason why these two investments are the world’s greatest assets, in my opinion, is because they let you earn twice. First, businesses pay regular dividends while real estate brings regular rental income. And second, because both increase in value over the years.
So, I just stick to the core with what has been proved by history.
Assets
Assets are things your family owns that have value, such as:
- Your home
- Vehicles
- Investments
- Bank accounts
- Retirement savings
- Personal belongings like jewelry or collectibles
Most of my family assets include residential real estate, then bank deposits, and then this online business. As mentioned, I would like to add quality dividend stocks in the future.
I split our family assets into three major categories such as Liquid Assets, Illiquid Assets and Income-generating Assets.
- Income-generating Assets include real estate, bank deposits, online business and dividend stocks (currently none yet). Most of our family assets are invested to generate passive income.
- Illiquid Assets include debtors that owe us money, my wife’s housing fund, my wife’s public pension fund, insurances and school fees for children that my employer covers. Our Illiquid Assets are much larger than Liquid Assets.
- Liquid Assets include mainly cash in Chinese RMB and foreign currencies that we hold such as USD and PLN. We do not keep much money in cash.
If I can diversify all our wealth across four different independent types of investments (real estate, bank deposits, online business and stocks), that is more than fine with me. I will surely be diversified.
Liabilities
Liabilities are debts your family owes, such as:
- Mortgage
- Car loans
- Student loans
- Credit card balances
- Personal loans
Remember, cash is king! We do not have any mortgage or long-term bank loans. We have never had any loans like student loans or car loans in the past either. We have been completely debt-free for years and on the way to financial independence as early as in 2024. I will be 36-years-old and my wife will be 35-years-old when that happens. Our apartment which is our primary residence was paid in full in cash.
The only temporary debt that we have on monthly basis are credit cards. We currently use two credit cards to pay bills and shop for groceries. We always make our credit card payments on time, every time.
TIP: We use credit cards to benefit from a grace period (the amount of time you have to pay your balance in full without incurring any interest) to delay spending cash by around 1.5 months. In this way, I am able to start investing in deposits a bit earlier, so they will mature earlier.
Sometimes I wonder how much more I could do using the leverage (debt). But then, I realize that ‘the borrower is always a slave to the lender’. And I refuse to be that slave. Living without debt helps me sleep well at night.
NOTE: I will not be ‘investing’ in bonds as I do not want to own someone else’s debt.
What we do not invest in?
I do not even bother with buying rare art, bitcoin, wine, sneakers, wristwatches or silver coins as investments.
First, I have no knowledge about it and no experience. Second, it is difficult to liquidate (you need to look for the buyer long and hard). And third, I believe that there are much better ways to generate and store wealth such as quality businesses and real estate.
In summary, understanding your family’s financial situation can be helpful for budgeting and managing expenses, planning for future goals like retirement or education as well as making informed decisions about debt and investments.
