You should be aware of only two kinds of assets when you think of a potential early retirement. The first type is the appreciating asset. Appreciating asset are those properties that have increasing value over time. These properties are vital for an early retirement.
Personal property or depreciating property is actually detrimental to accumulating appreciating assets. Cars, clothes and furniture are all depreciating assets. While it is okay to invest in some, especially if you have a new house, buying those repeatedly is not a good idea.
Reduce consumption now
The same way “reduce your speed now” functions, it’s time to cut down on consumption. We don’t mean here food and other vital commodities. We are speaking here of buying clothes you don’t need, a new television set you don’t need, etc.
Arjuna Higgins of Inter-Alliance Group states:
“Clean house. If you want the best incentive to stop spending, dean your house. Go through every closet and cabinet and set everything out on the counter. Take an inventory. I don't known about you, but I have the habit of buying things I already have at home.”
“You know what I mean. You think you're out of something because there's so much clutter in your house that you can't find anything. Whenever I do an inventory, it immediately kills any urge to splurge. I realize that, I already have too much stuff.”
What kind of assets would be good for your financial future?
Liquid assets are basic. These assets are easily convertible to cash and have appreciating values, as they are unused over time. Checking accounts, savings account and money market accounts (in the United Kingdom) are considered liquid assets. Certificates of deposits are also a liquid asset.
If you are unable to invest in other appreciating assets, at least keep your liquid assets growing. “Invest in saving” is the way to go. If you’re having trouble in saving on your own, get someone to save for you.
If you’re on a regular monthly payroll account, have a certain percentage of your monthly income put in an annuity account. You can start from as low as 3% to a high of 15%. It all depends on your current condition.
Some people can put away around 50% of their total income for savings because they don’t have families. Some families are so thrifty that a 20% slash from their monthly budget doesn’t affect them.
Another type of appreciating asset is the investment asset. Investments assets include stocks and bonds. Putting money in a mutual fund is also considered an investment asset. The beauty of investment assets is you will be able to see your money grow on a daily basis.
Real property is another kind of appreciating asset. Invest in land, because land is inherently in scarce supply. While the price of rent may drop from one period to another, land will always remain expensive. Invest in land whenever you can, so in the future you will be secure.
In the United States, real property constitutes the greatest source of money and wealth for most families. The more real property you have, the more financially secure you will be.