I have been reading a lot of books on finances and real estate. One book that has struck me enough to blog about it is a book titled “Rich Kid, Smart Kid” by Robert Kiyosaki. I have read a bunch of Robert Kiyosaki’s books. I have been reading this one to help give me ideas on how to educate my kids and myself on finances.
A couple key concepts that have struck me:
- “My banker has never asked me for my report card” (p. 116).
- “Your financial statements is your report card once you leave school” (p. 118)
- Financial statements consists of two statements:
- Income & Expense statement
- Assets and Liabilities statement
- Build a financial statement for your life.
- To build Income and Expense statement, record all your income (job, dividends, interest, etc) and expenses (everything that you spent money on) for the last 30 days
- To build Assets and Liabilities statement, record all your assets and liabilities.
- Assets: Things that put more into your pocket. Generate cashflow/income. Examples include: positive cashflow rental properties, savings account, dividend paying stocks
- Liabilities: Things that take money out of your pockets. Generate expenses. Examples include: your house (Robert classifies your house as a liability since it takes money out of your pocket to maintain), car, and any doodad.
- The key is to continue to acquire assets so that you can build up passive income.
- Need to focus upon converting earned income (e.g. from a job) into passive income (generated by my assets).
- Review your financial statements on a quarterly (or more frequent) basis
- Key thing to understand is the cashflow