Personal Assets The fourth bucket is your personal assets. These include all of the physical things that you buy over time such as your house, your car, a second home, art and jewelry, boats, and
airplanes. These types of assets will vary greatly between people but there are a few general concepts that usually hold true for almost everyone.
First, other than minor purchases such as household items, clothes and other small items,
many of these assets have a mortgage associated with them. Second, if there is an associated mortgage they often involve some sort of down payment, usually in the 20% range.
Third, in the case of real estate, these assets usually appreciate over time and as the debt is paid down the “equity value” increases due to appreciation and debt reduction. Fourth,
often as a person’s overall wealth increases, the number and value of these assets will increase as well. Fifth, usually as debt is paid down and the value of assets increase, these personal assets can be used to fund family ex-
penditures such as another purchase or educational expenses. This is usually done via refinancing or borrowing on a Line of Credit secured with a second deed of trust. Sixth, as a person grows older and gets closer to retirement, they might be motivated to liquidate some of these assets.
A nice thing about personal assets is that as you build equity, you can use that equity to acquire more personal
assets. This is illustrated in the chart on the next page with three families—the Smith Family, the Jones Family and the Peters Family. All of the families decided to purchase a home where they can start a family. Each family makes a $100,000 down payment and takes out a $400,000 mortgage. The Smith Family takes out a 30 year mortgage
while the Jones and Peters families take out 15 year mortgages. All of the mortgages are at 5%. Also assume the
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