Welcome back! It’s Robert Kiyosaki here with Alexa, discussing Millennials and money. We have covered various lessons about assets, liabilities, and financial intelligence. Let’s delve deeper into these concepts.
The Basics of Financial Literacy
1. Assets and Liabilities Assets put money into your pocket, while liabilities take money out. Understanding this difference is crucial for financial intelligence.
2. The Importance of Cash Flow The six most important words for financial intelligence are income, expense, asset, liability, and cash flow. Controlling cash flow is the key to being rich, not just having a college education.
3. Financial Statements Most college graduates don’t know what a financial statement is. Financial literacy starts with understanding income, expense, asset, and liability.
Applying Financial Intelligence
4. The Reality of Home Ownership A personal residence is not an asset if it takes money out of your pocket. An investment property, on the other hand, can be an asset if it generates income.
5. Cars and Other Liabilities Cars are liabilities due to insurance, gas, and upkeep costs. However, a taxi car can be an asset if it generates cash flow.
6. Human Liabilities People can be assets or liabilities. Children, aging parents, and even spouses can become financial liabilities. It’s important to plan for these potential expenses.
Real-Life Examples
7. NFL Players and Cash Flow Many professional athletes earn millions but end up broke because they can’t control cash flow. Financial intelligence is about managing cash flow, not just earning money.
8. Personal Investment Experience Investing in rental properties can generate cash flow and reduce taxes. Robert and Kim’s experiences with rental properties highlight the importance of smart investments.
Financial Planning and Responsibilities
9. Planning for Family Liabilities As people age, family members can become financial liabilities. It’s essential to plan for long-term healthcare and other expenses.
10. Bad Advisors and Financial Risks Bad financial advisors, business partners, and even spouses can become liabilities. It’s crucial to choose trustworthy advisors and partners.
11. The Importance of Financial IQ Financial IQ measures your ability to solve financial problems. Controlling cash flow and planning for future liabilities are key aspects of financial intelligence.
Conclusion
Financial intelligence is the ability to control cash flow and plan for future expenses. Understanding the difference between assets and liabilities, and making smart investments, can lead to financial success.
FAQs
Q1: What is the difference between an asset and a liability?
A1: An asset puts money into your pocket, while a liability takes money out of your pocket. Understanding this difference is crucial for financial success.
Q2: Why is cash flow important?
A2: Controlling cash flow is essential for financial intelligence. It’s not just about how much money you make, but how you manage it.
Q3: How can I improve my financial literacy?
A3: Start by understanding your financial statements, including income, expense, asset, and liability. Educate yourself about managing cash flow and making smart investments.
Q4: Are children and aging parents financial liabilities?
A4: Yes, children and aging parents can become financial liabilities. It’s important to plan for their expenses and ensure you have the resources to support them.
Q5: What should I look for in a financial advisor?
A5: Choose a trustworthy financial advisor with a good track record. Avoid advisors who may have conflicts of interest or questionable practices.