Do you have the brain power

Posted by in Accounting, Auditing & Tax


The rich and successful stand out from the rest because of their Financial Intelligence education, not their scholastic education. This is something that we are not taught in school but rather something that is acquired. To give you an example: Is your home an Asset or a Liability? The general consensus is that it is an Asset. But is it? To answer that question we must first understand the difference between Asset and a Liability (financial intelligence). Simply put: "An Asset puts money into our pockets." "A Liability takes money out of our pockets." Knowing these two basic rules of financial intelligence let us re-visit the question. Is your home an Asset or a Liability? 1. Every month we make a mortgage payment - (Cash flows out). 2. We pay yearly taxes on our property - (Cash flows out). 3. We have to pay for repairs - (Cash flows out) 4. When the mortgage is paid we still have to pay the other two - (Cash flows out) As you can see, if you buy a home, cash will always flow out of your pocket. Thus your home is a Liability. Does this mean that we shouldn't buy a home? No, not at all. The point that is being made is that if we wish to be rich (or wealthy if you are uncomfortable with the word rich) and successful we need to understand how to accurately distinguish Assets from Liabilities. Most people spend a lifetime acquiring Liabilities rather than Acquiring income generating Assets. The rich or wealthy spend a lifetime acquiring income-generating assets and purchase liabilities that work for them instead of against them. An interesting fact and one that seems to be a stumbling block for most people is that you don't need to be rich to acquire income-generating assets. 80% of today's wealthy had nothing when they started. The other 20% inherited their fortunes. So, if you desire to be wealthy there are two basic things you have to learn how to do: 1. Continually acquire income-generating assets (cash flows in). It does not matter how small they are when you start. Over time assets will build up. 2. Learn to acquire Liabilities that work in your favour and not against you. "It's not how much money you make, its how much money you can keep that counts. There is always hope for those that help themselves"
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