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Houses and Cars are Assets
Reading
When talking of debt, we talked about mortgages and car loans. Well, good news is that these are collateral-backed loans and that collateral is a material item you can add to your assets! In other words, if you borrowed half a million dollars for a house, you didn’t lose half a million dollars from your net worth. Rather, you subtract the loan, but you add the value of the house. The upside to this is that if the house gains value, your net worth goes up since the debt is the same as it was at the start. Cars can also count, although they always lose value over time so its less of a viable asset long-term.
Tips
- Collateral bought with debt counts as an asset.
- Example: A new house is both debt and asset.
- Houses can gain value, but cars generally won’t.