ASSETS and liabilities
Basic concepts of financial intelligence that are not taught in traditional schools, or rather not taught there, but there are different definitions. Below are the two that are absolute essentials and that I recommend to those seeking financial freedom.
Assets put money in your pocket.
Liabilities take money out of your pocket.
Very simple definitions…right?
Without going into more complicated definitions, it can be said that in traditional accounting, assets (economic resources) are related to the company’s resources and the possibilities of converting them into cash. Liabilities, on the other hand, speak about the sources (origin) of the company’s assets. This is not very consistent with the definitions I propose, which are sufficient for the basics of financial intelligence.
Everyone who works and lives in this world needs a source of income to be able to cover their expenses, i.e. current living expenses and, of course, taxes.
Most people cover their expenses through full-time work. This means that they depend on the employer and the state’s fiscal system (taxes). Financial intelligence is about noticing that there are other sources of income than full-time work. It’s about assets that put money in your pocket (cashflow).
Look:
- cash flow for assets;
- cash flow for liabilities;
- a poor person’s cash flow;
- cash flow for the middle class;
- cash flow for the wealthy;
- cash flow at companies.
Sources: Rich Dad Poor Dad, Robert Kiyosaki, Chapter II, Lesson 2, “WHY TEACH FINANCIAL LITERACY?”