What Is a Personal Asset? Definition and Examples

A personal asset is any item of economic value that an individual or household owns. This knowledge is useful for various financial activities, from applying for a loan to planning for retirement. The scope of personal assets is broad, encompassing everything from physical objects in your home to financial accounts and investments.

Common Categories of Personal Assets

Personal assets are divided into two classifications: tangible and intangible. Tangible assets are physical items that you can see and touch. This category includes real estate, which is often a person’s most significant asset. Other tangible assets are vehicles like cars and boats, and personal belongings such as jewelry, furniture, art, and collectibles.

Intangible assets lack a physical form but hold monetary value. This group is primarily composed of financial instruments like money in checking and savings accounts, investments such as stocks and bonds, and retirement accounts like 401(k)s and IRAs. Intellectual property, such as patents and copyrights, is another example.

Assets can also be described as liquid or illiquid. Liquid assets, like funds in a savings account, can be converted into cash quickly. In contrast, illiquid assets, such as real estate or fine art, are more difficult to sell and convert to cash on short notice.

Distinguishing Personal Assets from Business Assets

The primary factor distinguishing a personal from a business asset is its use. An asset used for personal, non-commercial activities is a personal asset. If it is used to generate income or for business operations, it is considered a business asset.

For example, a car driven for family errands is a personal asset, while one used for business deliveries is a business asset. This distinction is important for taxes, as business assets may be eligible for deductions like depreciation, a way to account for value loss over time. Personal assets do not qualify for these tax benefits.

For assets with mixed use, like a home office, specific tax rules apply. You must calculate the percentage of business use to properly allocate expenses. Keeping separate financial records and bank accounts for personal and business finances is recommended to ensure accurate tax reporting with the IRS.

How to Value Personal Assets

Assigning a monetary value to your personal assets is necessary for understanding your financial position, and different assets require different valuation methods.

For many assets, the most common method is determining their market value, which is the price an asset would likely fetch on the open market. For a home, you can estimate market value using online real estate tools or by looking at recent sales of comparable properties in your area. For vehicles, resources like Kelley Blue Book provide widely accepted valuations.

Unique or high-value items may require an appraised value, which involves hiring a certified professional to assess the item’s worth. Appraisals are frequently used for jewelry, rare art, and collectibles. For financial assets, the value is the amount listed on your most recent bank or brokerage statement.

Calculating Personal Net Worth

The primary reason to identify and value your assets is to calculate your personal net worth, which provides a snapshot of your overall financial health. To do this, you must also understand liabilities, which are your financial obligations or debts. Common liabilities include mortgages, car loans, student loans, and credit card balances.

The formula for calculating personal net worth is: Total Assets – Total Liabilities = Personal Net Worth. For instance, imagine an individual has total assets valued at $400,000, including a home and retirement savings. If their total liabilities, like a mortgage and a car loan, amount to $250,000, their personal net worth would be $150,000. A positive net worth signifies that you own more than you owe, while a negative net worth indicates the opposite.