Asset-rich vs cash-poor | How to balance properly?

Managing finances for the personal, family, and business life is not as easy as 123. There come complexities and dilemmas at times. Striking at a balance may not be comfortable readily. So, it is wise to consider the asset-rich vs. cash-poor or house-poor scenario and plan in advance.

Asset-rich vs cash-poor

Asset-rich, cash-poor refers to a person rich in property holdings and has minimal cash holdings that may lead to liquidity difficulties.

This concept may even apply to businesses or other entities too. Many business and social entities with huge fixed assets die from a cash crisis.

We are generally prone to possess more wealth in the form of the financial asset, physical assets, real estate, and agricultural property with the cash that comes to us. Therefore, it often creates imbalances as the day-to-day cash necessity may suffer the shortage.

You can not convert assets to cash for economic and psychological grounds. You can not sell off any asset at a reasonable price anytime. Availability of buyers, wealth tax rates, and other factors also matter a lot. Again, it is difficult to part with any belonging psychologically. There are family and peer pressure too.

Asset rich, income poor

Another aspect of asset ownership having less income generation. There are assets, stocks, or projects with higher growth but provide no dividend or returns regularly. The owner has no sufficient monthly income from those assets compared to the standard return potential from other investments. The monthly budget gets tight due to the liquidity crisis and the financial burden gets heavier.

Irrespective of the income, expense, and savings we may be in any of the categories below:

  1. Asset Poor, Income Poor
  2. Asset Poor, Income Rich
  3. Asset Rich, Income Poor
  4. Asset Rich, Income Rich

We may be An online survey with the participation of 1,068 individuals in India shows the statistics below:

  • 46% people are Asset Poor, Income Poor
  • 24% people are Asset Poor, Income Rich
  • 20% people are Asset Rich, Income Poor
  • 10% are Asset Rich and Income Rich

House poor and asset-rich

The term house poor is the individual spending most of the income on house ownership or housing and has to suffer cash poverty in maintaining other financial objectives.

land rich cash poor

Land-rich, cash-poor refers to the farmers who spend most of the excess cash on the development or purchase of land. However, they hardly have any cash to maintain or increase the landholding. Consequently, they are to lead poor lives without instant access to cash.

Is your real estate an asset?

Why people think of others as asset rich

Those who have already read the best-seller Rich Dad, Poor Dad by Robert Kyosaki may get the point. He did not term real estate straight asset in the book, mentioning that it might be your liabilities. Financial obligations like mortgage payments may be a curse for you. Housing-induced poverty is not a very uncommon phenomenon these days.

Advantages of holding cash

Cash is the most important factor for leading a comfortable life. It also helps the investors make great deals when the market is bearish. Some of the most common benefits of holding cash are written below:


The price of cash is not volatile. It ensures stability in purchasing power. Its value does not fluctuate as often as other assets.


When you have cash at hand, you are safe. You feel safe mentally too. The liquidity perspective plays a decisive role in many areas of life to manage financial obligations in a better way.

Instant access

Cash is accessible instantly. You need not wait for long to access it. In an emergency, it might be the best feature you desire. However, it may not be wise to hold too much cash at hand for ready availability.

Disadvantages of holding cash

Holding cash has some drawbacks too. There are complexities and devaluation you may think:

Excessive expenses

Availability of access to cash may make you lavish. You may spend money on less important or unnecessary sectors. Inefficient budget management may lead to a miserable life ahead.


Holding cash may not compensate for the inflation. Consequently, your money held as cash may lose the purchasing power day by day.

Risk of Theft

Cash kept with may suffer from the risk of theft. Even your life may be at risk to safeguard the cash.

Natural damage

Natural calamities like fire, cyclones, tornados, floods may damage your cash. As a result, it is natural that you will lose a significant cash holding during genuine emergencies.

Benefits of assets

Holding assets pays off well in most cases experienced over the last years. Despite the volatility, you are on the winning side if your assets are accumulating:

High return

Investment in assets or stocks offers better rates than traditional banks and financial institutes. Beating the inflation is easier with the return.


The value of assets is usually appreciated over the years. As a result, the appreciation rate is more than the rates provided by saving accounts or CDs.


Having an asset base strong is a matter of status and prestige too. Therefore, you are socially evaluated when you possess significant assets.

New income streams

With the investment in assets or stocks, you may create a new income flow. A new income-generating window may also open for you.

Problems of holding assets

Holding assets may not always bring blessings. On the contrary, they may come with pressures and bottlenecks in many ways. Some of the negative impacts of having more assets are as follows:

Difficult to liquid

You can not encash your assets instantly when an emergency comes. Based on nature, it may take days to years. So, keeping resources in illiquid assets may hinder your necessary encashment.

Matter of prestige

The sale of assets, genuine estate may be a matter of reputation. Therefore, you may not message disowning some of your assets.

Family Pressure

Offloading some assets may impact your relationships with other family members. For example, if you decide to sell the house you live may be opposed by other family members. Again, offloading stocks of a company where one of your family members is a director may create chaos in the family.

Exit costs

Exit costs of assets and investments may be so high that your plan may not work. For example, you can not take all the proceeds from the sale of any real estate or investment. In addition, there are property taxes and other transaction costs associated that may make an exit less lucrative than holding for a more extended period.

Maintenance Costs

Every asset needs maintenance and overhauling costs that come regularly and make it costlier than expected. Costs of homeownership especially are underestimated than the true costs. The housing budget fails in most cases so is the income on housing. For example, you are to pay  homeowners association, city corporation taxes, etc to maintain private property i.e. real estate.


Assets create more scopes of expenses and consequently more debts. For example, you buy a plot in installments over a few years. After the end of installments, the transfer and registration will require a handsome fund. 

After that, you are required to manage funds for construction. In the beginning, you might not think so much about the total costs, but over time, all expenses come before you, and you are over-indebted.

Costlier than expected

Most of the projects and investments end with more costs than expected. This is because some parts of the expenses are not considered before taking the projects. As a result, it gets costlier over the years, and there is hardly anything to do without accommodation.

How to balance properly?

Regular Income

Find some ways to ensure regular monthly or annual income streams to cover your probable living expenses. Manage investment portfolios in such a manner that ensures sufficient income streams.

Hold some cash

Holding cash has both advantages and disadvantages but you can not lead your life without some cash or equivalents. Keep provisions for liquid assets to manage the monthly expenses.

Emergency Fund

Always try to keep an emergency fund to finance your urgent unexpected expenses. It will financially help you urgently when an emergency hits you.


Prepare and follow budgets strictly to track and control income and expenses. You need not be 100% rigid but maintain a budget for proper financial plans. If necessary, take consultancy from a professional financial planner.

Wrapping up

Asset-rich vs. cash-poor is a problematic struggle requiring perfect balance that is not practically easy to manage. However, keeping a conscious balance and emergency fund makes your finance and investment decisions effective. Want to know more about what to do to address the situations?


  1. Very Inshightful write-up.
    Thanks for sharing.
    I think we should be aware of discounting future benefits (cash flow) for present satisfaction by purchasing lavish products through using Credit cards. Much behavioral change is required.

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