While it is completely natural to think about assets and wealth in financial accounting terms, in reality it’s not a neat and logical process.
There is a distinction that needs to be made between tangible and intangible assets. Tangible or financial assets like property, a unit trust portfolio or a bank balance are easy to quantify, measure and report on. When one refers to someone’s wealth, we immediately tend to think of these very measurable assets.
However, we shouldn’t forget about the less easy to measure other assets that play a crucial role in our lives. Intangible assets such as skills, knowledge, good physical and mental health, a supportive family structure and a network of friends and associates that you can rely on are just as important for a productive and meaningful life.
They lack physical existence and are far more difficult to quantify and measure, and they can’t be traded like a house or car. These assets simply aren’t substitutable or reversible but it doesn’t make them less valuable.
Asset Management
Most financial assets will suffer from some sort of depreciation over time if neglected or not maintained. Intangible assets are no different.
Viewed in this way, it is clear why friendships, health and knowledge are valuable assets and won’t disappear tomorrow. However, if you fail to invest by not keeping in touch with a friend, refreshing your knowledge and skills or staying healthy and active they will eventually depreciate and could disappear.
One needs to identify, maintain and continually reinvest in these assets over your lifetime. So, if you are considering doing that IT course, joining the gym or getting in touch with an old friend – don’t delay the investment.
Financial security still plays a role when it comes to investing in these assets. Money pays for gym memberships, family holidays and courses to increase your knowledge. Just as money helps support these, they in turn help to support financial success.
Think for a moment of the role that good skills and knowledge play in your earning potential versus the potential negative knock-on effect that bad health or a disruptive family life can have on your stress levels and productivity at work. These are important inter linkages, and getting the balance right is crucial.
In summary, we believe you should move beyond the traditional measurement of wealth. Let’s consider the wider notion of return on life rather than return on investment. Identifying your intangible assets, recognising the importance of nurturing and investing in them will certainly drive a higher return on your life.
‘A return on life rather than a return on investment’ makes for an excellent mantra by which to live fully.