Finance Coach - Vol. 28

Finance tip: Assets

Buy appreciating assets. Many of the more expensive, or big-ticket, items that we purchase lose their value over time. This is known as depreciation, and your car is generally a good example. Many people view their car as an asset, but fail to realize how much value it actually loses over time. As a general rule, a car will lose 20% of its value in a year (this number is higher for certain makes, and lower for others). A good financial habit, though – especially when buying big-ticket or luxury items – is to aim for assets that appreciate in value. Essentially, this means that you should aim to own assets that will increase in value over time. As this is not always possible, a close second is to have assets that at least hold their value well and do not depreciate much or at all. There are certain assets or luxury items that are generally regarded as having a good chance of holding or increasing in value: Boats; planes; art (especially if by a recognised artist); collectors items; antiques; etc. The application of this principle in everyday life would be when looking at buying a car, for example. If you are simply needing a vehicle as a run-around, rather look at one that has lost most of its value already – it’s value should remain fairly static, and you will not lose much when it comes time to sell it on. If you are looking at buying a vehicle as a reward for years of hard work, though, consider looking at buying a classic car instead of a brand new one. You could find one going for a steal, spend a little restoring it, and then be the proud owner of a collectors item that’s in hot demand, and appreciates in value every year. Or if you’re doing some re-decorating at home, rather than wasting money on decorative knick-knacks, look at buying a few choice pieces of art by up-and-coming artists. If the artist is only just starting out, you could get them for almost nothing and, if they start to grow a following in the art community, you could have your hands on some valuable pieces in a few year’s time…

Business tip: Staff

This week’s Finance Tip was a bit lengthy, so I’ll keep this one short! Think carefully about how you refer to your employees. When you’re talking to people about your business, how you refer to your employees can make a big difference. Using the word ‘employees’ can give the impression that you are somewhat autocratic or condescending. Rather use words such as ‘colleagues’ or ‘associates’. These are both fair reflections of your relationships with your staff, and shows that you value and appreciate their contributions to the business…