Own Your Assets“The greatest obstacle to discovering the shape of the earth, the continents and the oceans was not ignorance – it was the illusion of knowledge.” Daniel Boorstin
Fixed assets give financial institutions economic control over your money. Why? Because they can take the asset back if you stop making payments.
Academically speaking, the present benefit of an asset involves a capacity to contribute to the future net cash flows of your operation. Since you are paying for the asset you get controlled access to its use. It's your right to the benefit as a by-product of the payments you are making.
However, having the use of an asset is not the same as owning it. Assets are equal to “equity” plus “liabilities.” Until the last dollar owed for that use is paid, the true ownership remains with the third-party it came from. You only have access to its use all the while the principal payments you are making to the third-party increases your eventual ownership of the asset.
You may be thinking “but, the potential money I’ll earn will be more so that justifies my financing and other costs”. What you pay in interest, excess taxes, and fees offsets your profit and that's just the beginning of the issue.
As your attention is focused on "assets" and their perceived "rate of return" much or all of your growth is stolen out the back door by costs seen and unseen. Real growth is minimal at best. The “bottom line” is commonly negative.
Year to year you earn enough money to disguise the problem and overcome the costs, but the costs still exist and severely diminish what could be.
More to come . . . . . . .
Converting Fixed Assets into Real Assets
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