How to Leverage Your Assets to Work Smarter, not Harder

Money is something most people are not taught about. We all fumble through somehow. We learn to live within our means, get into/out of debt, and (hopefully) pay our taxes in a timely fashion. When you go into business for yourself, the land of finance expands and it can seem like unfamiliar territory. In this article I want to talk about how it functions very much the same, but also is a very different game.

First off, everything you’ve learned about personal finance holds true for your business. If you’ve learned through a painful journey of trial and error, that learning still counts! Money comes in, money goes out and at the end of the day, you’d prefer a positive bank balance to a negative one. It’s helpful to keep separate bank account(s) for your business. (And, for LLCs, it’s legally recommended!) Employers provide payroll services including tax withholding and setting aside for retirement. Employed people get used to these things happening before they ever see it in their bank account. When you become self-employed you can recreate these in your business. Yes, you see all the inner workings of it and that can be overwhelming or nebulous to get set up.

Out of Personal Finance into the Land of Assets

The big difference in being self-employed is bigger than just seeing the sausage get made. When you don’t own a business, property, or investments, your only asset, in a financial sense, is your labor. In Capitalism, assets generate returns. Employees turn their asset “labor” into a return “paycheck.” But any asset can create returns. When you own a business this is the new rule book you’re operating from, whether you know it or not. Money makes money. There are some inherent ethical problems to this not to mention the screwy tax laws surrounding it. The problem I’m trying to address in this article is how many of us are playing a game that we only have access to half the rule book! (Also, my ethics on this are square because I’d rather YOU have access to more money than it going into the pockets of the uber-rich!)

Once you have a business (yes, even a small self-employed business) you now have a new kind of asset. You have your labor AND the business. They are two different things. This is what makes *profit* different from *pay* in your business. (This is the whole point of the book Profit First.) Understanding how assets function allows you to better plan how to use your time, energy, and money. Cause it’s all about working smarter, not harder.

Why Assets Matter

Here’s the thing about assets: they make money that is not tied to your time and effort. There are a finite number of hours in a day and you are the only you. Your labor is a finite resource! Assets are potentially infinite! (Ok, I get carried away. One person should not have access to all the assets on the planet.) Working your assets is key to building a secure retirement, all dreams of “passive income,” and freeing up your time.

This isn’t some abstract pie-in-the-sky thing. If you can live off of 4% of your total assets, then you’ve secured a solid retirement. (You could also retire earlier but the math on that is fuzzier. Read more about the 4% rule.) Here’s how to figure out what target total assets that would be for you. Take your monthly spending habit and multiply by 12 to get a yearly spending number. Divide that number by 0.04 and that would be your asset goal. e.g. if I live off $5,000 per month, that’s $60,000 per year, so assets of $1.5M would be enough to retire.

Your number might seem unattainably huge. But assets have a tendency to grow in value. Plenty of assets grow the way compounding interest grows, e.g. exponential growth. This means the passage of time is the biggest factor towards hitting that asset goal. That and the knowledge of how to use your assets towards achieving that goal.

Assets — But I Don’t Have Any?

You might also note that the richest of the rich people have GOBS more than your number. Let’s break down what I mean. $1 billion is a $1,000 million. In my previous example, I calculated an asset goal of $1.5M. A billionaire can fund that retirement goal for 665 people while leaving himself in no worse position than them. Let’s set aside any social justice feelings this may inspire; they’re accurate but not why I’ve taken us down this path. Compare the number you calculated with $1,000 million aka $1 billion. Whatever huge number you have for yourself is not actually that big in the context of the world we live in. It’s not an immoral number; with the state of social security, it’s a totally reasonable goal. It’s also not unattainable

You might have more assets than you realize. You already have labor figured out. Let’s take a peek at some major types of assets and those you’re likely to experience. Keep in mind that none of these generate 100% free money. There will almost always be some kind of overhead or fees. This could look like paying fees to your investment manager, book publisher, real estate agent, or sales platform. Someone is going to be due a small cut of your investment or “passive” income.

Property or Real Estate

These types of assets often increase in value, though theoretically they can go down in value. They can also earn revenue in the form of rent. If you own your home, then your down payment is doing this sort of growing already. This asset is the value of the property and does not deduct the mortgage. This means if you invest a down payment into a rental property that is cashflow positive your assets will instantly grow to include the value of the rental property. A great resource for learning more about real estate investing is Bigger Pockets.

Stock, Bonds, Mutual Funds

These types of assets tend to increase in value in the long term, but they are more volatile than real estate. They can earn revenue in the form of dividends. Though, you may not be aware of the dividends because they are being reinvested into more funds. Most retirement accounts (401k’s and IRA’s) are invested in some blend of these. If you’ve been making contributions to a retirement account, then you might have been participating in this without even knowing! Are your funds growing at a competitive rate (6% is a bare minimum), or is that money just hanging out and not doing any work?

Intellectual Property

Intellectual property rights are also an asset. Traditionally this encompasses book and photography royalties. Arguably this could extend to online courses, e-books, affiliate marketing, sponsored social media content, and the monetization of a blog or youtube channel. Since the proliferation of social media, the intellectual property seems to hold less value than the following. Keep in mind that a following needs to be substantially large in order to function as an asset. This means a fair amount of upfront work before your following could start generating true passive income.

Business Equity

Your business has a value, it can increase in value and even, possibly, be sold! Business value is usually related to the volume of sales or gross revenue, but the approach can vary. Valuing a business is an art more than a science. Valuing a self-employed business can be tricky because you-the-person and you-the-business overlap so much. That doesn’t make it impossible to sell. An “apprentice and transfer” strategy is a great way to sell a highly personal client base to another professional.

You’ve already thought of your business as a way to generate your income. You can also think of your business as an asset. How does that change your decisions surrounding your business? Are the dreams of a book deal or an online course set in a new context? Do ideas of delegating or automating suddenly have more value? (Let me know in the comments!)

Grounding This Conversation

I’m sure for many of you, your brain is swimming in this whole wide new world. So let’s bring this back down to earth with some concrete action steps. Don’t overwhelm yourself: pick ONE of these to do. You can always come back to this article and choose another later.

  • If you don’t currently, figure out a small number you can regularly set aside for retirement. (If you need help figuring this out, A Dance with Finance will teach you how to budget less while still achieving your goals!) (If you already make regular contributions to your future-self, give yourself a pat on the back!)
  • If you got a big tax return, stick a chunk of that into investments.
  • Take a more active role in understanding your 401k or IRA (if you have them.)
  • Plan your business to provide your salary AND your profit. I offer a step-by-step guide in this online course!
  • if you’ve already got all of the above covered, contact a financial planner. A good financial planner will support you in investing your money wisely so it can do work. They understand that “saving for retirement” is only one part of the equation. They can help you learn how to make the money do the work so that you have more options with how you spend your time. The really good ones even know how to invest your money in ways that align with your ethics and help keep corporations accountable.

Originally published at on April 26, 2022.




Maggie is a business coach who helps launch and grow self-employed businesses. Learn how she could help you at

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Maggie Karshner

Maggie Karshner

Maggie is a business coach who helps launch and grow self-employed businesses. Learn how she could help you at

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