Spending less money than you have is the only way most people develop assets. An asset is something you have or own, that usually increases in value over time, and that other people consider valuable. A house is an asset that may be worth more each year, and other people are willing to pay you money for it. A good education is an asset because employers are willing to pay you better wages than you would get without it. A savings account is an asset because it lets you accumulate money and, it shows credit lenders that you are careful with your money. In order for you to achieve your dream(s), you will have to acquire some assets. Unless you win the lottery or receive a big inheritance, you will probably have to earn and save the money to develop assets.

There are two kinds of assets. "Appreciating" assets gain value over time, and "depreciating" assets lose value over time. A house usually becomes more valuable over time, whereas a car, (which some people consider to be an asset), quickly loses value. Most people acquire a house by making a down-payment (from savings), and taking out a loan (called a mortgage) that they pay every month for fifteen or thirty years. A fifteen year mortgage has a higher monthly payment, but you pay the lender less interest in fifteen years than you would pay over thirty years, so ultimately the house costs a lot less. Even though you have to pay the lender interest every month, the house continues to gain value, so it is worth paying the fee.

Most people also take out a loan to pay for a car, but the car begins to lose value the minute you drive it off the dealer lot. Also, loans for vehicles usually have a higher rate of interest (monthly fee) than loans for houses. Every mile you drive it, a car has less resale value. If you take out a four-year loan on a car, by the time you have paid off the loan, the car may only be worth a few hundred dollars in resale value and you may already need a new car. So, ideally, you can save hundreds of dollars in interest by paying cash (from savings) for a car, rather than taking out a loan. You can save money buying an older car that has already lost value versus a new car that begins to lose value (depreciates) as soon as it’s driven off the lot.

ACHIEVE YOUR DREAM!