Understanding and controlling assets effectively is key to managing your finances and building lasting wealth. In this article, we’ll explore what an asset is, the difference between liquid and hard assets, how wealthy individuals use corporate structures to “own nothing but control everything,” and examples of liquid assets you can start incorporating into your portfolio today.
What Is an Asset?
An asset is anything that holds financial value. The critical factor to consider is whether the asset is appreciating or depreciating. While you might hear about investing in appreciating assets, it’s also smart to own assets that provide a depreciation schedule for tax benefits—like specific business equipment or real estate investments. However, personal items such as cars and boats depreciate unless they are rare collectibles.
Assets broadly fall into two categories:
- Hard assets: These include real estate, art, and equipment.
- Liquid assets: Cash and investments that can quickly convert to cash.
Liquidity is crucial. While funds invested in specific platforms might allow you to withdraw in a few days, assets like real estate or a farm in development are much less liquid—they can’t be quickly converted to cash because the money is tied up in physical improvements and operations.
Why Money Is the Most Liquid Asset
Money, especially cash, holds immediate value and can be used instantly for transactions without being converted or sold. This liquidity is why money plays a central role in any portfolio.
How to Own Nothing but Control It All: The Rockefeller Principle
The Rockefeller style of wealth management is about controlling assets through strategic corporate structures without owning them personally. For example, vehicles, phones, and other personal property are held by companies rather than in an individual’s name. Often placed in trusts, these companies help avoid probate and create a legacy that can be passed down efficiently.
However, setting this up requires professional guidance. Basic “DIY” trust packages won’t cover the complexities involved. Instead, you need a coordinated team of experts to design a comprehensive plan. This legacy involves tax strategy, asset protection, and succession planning.
Structuring Wealth: The Tax Trifecta
Wealthy individuals structure their finances around three pillars:
- How they earn income.
- How they keep income through deductions and tax strategies.
- How they invest income into assets that maximize tax benefits.
For instance, investments in assets like gas and oil, aviation, and water rights have significant tax depreciation advantages, reducing taxable income and boosting cash flow.
Examples of Liquid Assets
Understanding liquid assets helps you build a flexible financial foundation. Examples include:
- Cash (savings and checking accounts)
- Stocks and bonds (which can usually be sold quickly)
- Money market accounts and cryptocurrencies (convertible if you know the process)
- Retirement accounts like 401(k)s and IRAs (liquid under certain conditions)
Less liquid assets include real estate, collectibles, jewelry, antiques, and art—investments that require more expertise to profit from and may not be readily sold without loss.
Why Liquidity Matters
A three-month emergency fund in cash is a standard recommendation. Still, if you have reliable income streams, you might rely on those earnings instead. The biggest threats to wealth aren’t market fluctuations but unplanned events: health emergencies, legacy issues due to lack of proper estate planning, and divorce.
Final Thoughts
Most assets are not liquid, and understanding what liquidity means for your investments is essential to managing risk and opportunity. Professional guidance is key if you want to build lasting wealth with the sophistication of the Rockefeller legacy. Avoid costly mistakes by working with a team of experts who can help you design a comprehensive, tax-efficient, and legacy-focused plan.
If you want to learn more or need help structuring your wealth, consider contacting professionals in this area. A well-designed financial plan is not just about making money. It’s about controlling, preserving, and passing on that money.
