{"id":3048,"date":"2009-01-27T09:08:29","date_gmt":"2009-01-27T15:08:29","guid":{"rendered":"http:\/\/www.paulryburn.com\/blog\/?p=3048"},"modified":"2009-01-28T14:17:55","modified_gmt":"2009-01-28T20:17:55","slug":"types-of-assets-how-people-screw-up-their-personal-finances","status":"publish","type":"post","link":"http:\/\/www.paulryburn.com\/blog\/2009\/01\/27\/types-of-assets-how-people-screw-up-their-personal-finances\/","title":{"rendered":"Types of assets: How people screw up their personal finances"},"content":{"rendered":"

Slow news day, so I figured I’d talk a little about this personal finance program I’ve been revising this month, which we intend to start selling online in February.<\/p>\n

In my opinion, the main thing the program does is teach you about the different types of assets you can purchase with your money.\u00a0 Here are the different categories of assets:<\/p>\n

Income-producing (IP) assets<\/strong> throw off additional money – they produce a return on your investments.\u00a0 These include stocks, bonds, mutual funds, CDs, savings accounts, Treasury bills, etc.<\/p>\n

Income-consuming (IC) assets<\/strong> are the opposite of IP assets – once you buy them, you have to spend additional money to maintain them.\u00a0 Houses are income-consuming assets because you have to pay property taxes, maintenance, insurance, etc.\u00a0 Cars are income-consuming assets because you have to pay for gas, insurance, repairs.<\/p>\n

Non-performing (NP) assets<\/strong> are assets that realize a gain, but you can’t get the gain until an event happens.\u00a0 The appreciation in the value of a home is an NP asset.\u00a0 For example, if you bought your home for $150,000 and it’s now appraised at $170,000, (Edit: I had this wrong when I first posted it)<\/strong> you have a $150,000 IC asset and a $20,000 NP asset.\u00a0 However, you can’t get your hands on the $20,000 until you convince someone else to buy your place.\u00a0 IP assets are liquid; NP assets are not liquid.<\/p>\n

Neutral (N) assets<\/strong> neither throw off income nor consume resources to maintain.\u00a0 Art, jewelry, and furniture are in this category.<\/p>\n

The program also keeps track of liabilities (L)<\/strong>.\u00a0 Liabilities are money you owe – mortgages, car notes, credit card debt, etc.<\/p>\n

The program defines saving<\/strong> as anything you do that causes an increase in income-producing (IP) assets or a decrease in liabilities.\u00a0 The program charts out how much of your assets will fall into each of the asset categories, based on what you’re doing now with your money, for the next 25 years out, projecting total dollar value of each type of asset, and showing the percentage each type of asset will contribute to your total net worth.\u00a0 This data allows you to answer the question everyone wants answered – “am I saving enough?”<\/strong> If you don’t like the future the program shows you, you can adjust what you’re doing in the present to change it.<\/p>\n

Note that this program is not Quicken, and does not try to be.\u00a0 Quicken is great for handling your financial present (e.g. online bill paying) and seeing what you did in the past.\u00a0 Our program helps you plot your financial future, using a unique algorithm that is covered by a United States patent.<\/p>\n

Working with the program gives a lot of insight why people’s finances are so screwed up.\u00a0 Many people have been told to buy as much house (or condo) as they can, taking out a mortgage to pay for it.\u00a0 That’s an IC + L double-whammy:\u00a0 Tying up almost all your money in an asset that eats future income, and then using debt to pay for it.\u00a0 Do this and our program will not show good things happening in your financial future.\u00a0 Of course, home ownership is a goal for most people, and it’s nearly impossible to buy without a mortgage these days, but our program will show you the long-term cost of the “spend all you can” philosophy.<\/p>\n

The program also illustrates where conspicuous consumption will get you.\u00a0 We’ve been taught to purchase cars as status symbols, paying for them with financing.\u00a0 Again, this is the IC + L combination.\u00a0 Purchasing bling-bling jewelry on a credit card is N + L.\u00a0 In neither of these cases are you saving.<\/p>\n

That’s just a quick overview of the kinds of things the program can tell you.\u00a0 I’ve been working with the program’s inventor, Lee Ryder, for 10 years now.\u00a0 I’m in the process of setting him up with his own blog, because he has a lot to say about personal finance and the discoveries he’s made using the program.<\/p>\n

We took it to market once before, about 5 years ago, and it was a disaster.\u00a0 For one thing, the program wasn’t ready.\u00a0 It had certain features that caused it to be compared to Quicken, that didn’t add any value and needed to be removed.\u00a0 Secondly, we wasted a bunch of money on expensive print media advertising and a Flash-based website.\u00a0 This time we’re going to follow the example Seth Godin sets out in his book Tribes: We Need You to Lead Us<\/a> $\"\"$ and use viral marketing to get the program in widespread use.<\/p>\n

We also made a mistake pricing it last time.\u00a0 We thought it should cost about what Quicken cost, and priced it in the $50-80 range.\u00a0 This time I’m pushing for $14.95 as the price.\u00a0 You’ll be able to pay for it online and immediately download it and begin using it.\u00a0 I also want to create an affiliate program, so that people who use the program and find value in it can get paid commission for referring it to their friends.<\/p>\n

Anyway, that’s a quick summary of what I’ve been working on the past 6 weeks or so… I really have been doing more than just sitting at the Saucer drinking Fire Sale beers all day long.\u00a0 I’m heading to Nashville the first part of next week for a meeting with the inventor, and then the wheels will really be in motion to get this thing to market.\u00a0 If you want to be notified when the program is released, e-mail me at paul@paulryburn.com and I’ll put you on the list.<\/p>\n","protected":false},"excerpt":{"rendered":"