| They have been educated by other educated professionals, such as bankers, accountants, real estate agents, financial planners, and so forthThe difficulty comes in asking adults to unlearn, or become children againAn intelligent adult often feels it is demeaning to pay attention to simplistic definitions
Rich dad believed in the KISS principle-"Keep It Simple Stupid"-so he kept it simple for two young boys, and that made the financial foundation strong
So what causes the confusion? Or how could something so simple be so screwed up? Why would someone buy an asset that was really a liabilityThe answer is found in basic education
We focus on the word "literacy" and not "financial literacy What defines something to be an asset, or imitation louis vuitton cheap price something to be a liability are not wordsIn fact, if you really want to be confused, look up the words "asset" and "liability" in the dictionaryI know the definition may sound good to a trained accountant, but for the average person it makes no senseBut we adults are often too proud to admit that something does not make sense
As young boys, rich dad said, "What defines an asset is not words but numbersAnd if you cannot read the numbers, you cannot tell an asset from a hole in the ground
"In accounting," rich dad would say, "it's not the numbers, but what the numbers are telling youIt's just like wordsIt's not the words, but the story the words are telling you
Many people read, but do not understand muchIt's called reading chanel cambon ligne bag comprehensionAnd we all have different abilities when it comes to reading comprehensionFor example, I recently bought a new VCRIt came with an instruction book that explained how to program the VCRAll I wanted to do was record my favorite TV show on Friday nightI nearly went crazy trying to read the manualNothing in my world is more complex than learning how to program my VCRI could read the words, but I understood nothingI get an "A" for recognizing the wordsI get an "F" for comprehensionAnd so it is with financial statements for most people
"If you want to be rich, you've got to read and understand numbers If I heard that once, I heard it a thousand times from my rich dadAnd I also heard, "The rich acquire assets and the poor and middle chanel classic flap bag replica class acquire liabilities
Here is how to tell the difference between an asset and a liabilityMost accountants and financial professionals do net agree with the definitions, but these simple drawings were the start of strong financial foundations for two young boys
To teach pre?teen boys, rich dad kept everything simple, using as many pictures as possible, as few words as possible, and no numbers for years
"This is the Cash Flow pattern of an asset
The above box is an Income Statement, often called a Profit and Loss StatementIt measures income and expensesMoney in and money outThe bottom diagram is the Balance SheetIt is called that because it is
supposed to balance assets against liabilitiesMany financial novices don't copy mulberry handbag know the relationship between the Income Statement and the Balance SheetThat relationship is vital to understand
The primary cause of financial struggle is simply not knowing the difference between an asset and a liabilityThe cause of the confusion is found in the definition of the two wordsIf you want a lesson in confusion, simply look up the words "asset" and "liability" in the dictionary
Now it may make sense to trained accountants, but to the average person, it may as well be written in MandarinYou read the words in the definition, but true comprehension is difficult
So as I said earlier, my rich dad simply told two young boys that "assets put money in your pocket Nice, simple and usable
"This is Cash Flow pattern of a chanel earrings liabi |
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