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What is a Personal Asset?

Mary McMahon
Updated May 16, 2024
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A personal asset is something of value which belongs to some. A classic example of a personal asset is a home, but personal assets can take a wide number of forms. The value of personal assets is often taken into account when people apply for loans or other forms of financial assistance, and when the net worth of an individual is calculated. Many people are surprised by the total value of their personal assets when they are added up.

Financial accounts like checking, savings, and retirement accounts are all personal assets, as are instruments like life insurance policies which have a cash value, even if that value is not accessible. Real estate is another example of a personal asset, as is a business, along with things like cars, electronics, and collections of art, antiques, and other valuables.

There are two ways to determine the value of personal assets. The first is to look at the market value, the amount which these items would fetch if they were sold on the open market. The second is to examine the appraised value, a value which is often significantly higher because it is based on the potential future sales price of an item. The difference between these values can be very important, especially when people are doing things like taking out insurance on a personal asset, as people are usually required to carry insurance on the appraised value, not the market value, which means that they will pay more in insurance.

Learning to manage personal assets is an important part of managing one's overall financial situation. Personal assets can be a liability or a genuine asset, depending on how they are handled and taken care of, and developing an asset allocation strategy is very important. For example, putting the bulk of one's personal assets into a single location or account is generally not advised, because this exposes people to higher risk. Likewise, failing to properly care for an art collection can cause it to decline in value.

Assets can also generate income. Real estate, for example, is a personal asset which can be rented or leased, while bank accounts can generate interest. People must be careful to keep track of income from personal assets because this income is considered taxable and there may be government penalties if the income is not properly tracked and declared on tax documents. It is also important for people who want to build up their overall wealth to learn to manage assets so that they generate the most income.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By SkyWhisperer — On May 22, 2011

@miriam98 - Proper assets management will answer questions about whether it’s an asset or a liability. In some cases it can be either one, depending on how you look at it.

I use personal asset management software to simplify the process, quantify my assets by their book value or appraised value, plan for any taxes and so forth. It uses an interview process like tax software and should answer any questions that you have.

By NathanG — On May 19, 2011

@miriam98 - I don’t buy his argument. A personal asset is something of value. There’s nothing about my liabilities (credit cards, for example) that has any positive value.

Real estate, on the other hand, appreciates over time. Yes, you won’t enjoy that appreciation until you sell it, but it’s still there. Liabilities are expenses. Just because you spend some money in the upkeep of an asset does not make it a liability.

By miriam98 — On May 16, 2011

We had this financial guru come to our area and give a lecture. He said he was going to change the way that we think about incomes, personal assets and liabilities. He said that most people think of their homes as assets, but actually they’re not, they’re liabilities.

This is because you’re paying a mortgage on it as well as all the expenses that come with home ownership. Only when you sell it (or get ready to), said this guy, does it become an asset. I don’t know if he was just splitting hairs but I wonder, does anyone here have any opinions on this?

By Lefty101 — On May 16, 2011

Hi, I think that’s a very well written article but I want to point out another type of personal asset. As a counselor I spend a lot of time helping people to determine and to develop such personal assets as self-confidence, social skills, reasoning and coping skills. These types of qualities are also referred to as personal assets.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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