Do What the Rich Do: Step 1 - Determine Where You Are

·         “If people knew how a financial statement worked, they would be more in control of their money.”

·         “A financial statement is your personal story told in number.”

·         Income can be earned, passion, and portfolio.

·         Assets that you own generate passive and portfolio income.

·         Earn Income – earn when you work for your money

·         Job Income

·         Self-employment Income

·         Passive Income – income earn from any asset you own

·         Real estate investment

·         Business

·         Portfolio Income – consist of

·         interest and dividends derived from investment such as paper securities

·         Royalties from products or services you create

·         Doodads – take money from your pocket, they aren’t true assets

·         Home

·         Personal Car

·         Jewelry

·         Furniture

·         Sports equipment

·         Other personal belongings

·         A banker’s idea of your total assets includes doodads; Rich Dad’s version excludes them.

·         “For each liability you have, such as car loan or mortgage, you’re an employee of the institution or person lending you the money.”

·         “The reason so many people struggle financially is because every time they make more money, they increase their taxes and their debt.”

·         Total Assets (per banker, with doodads) – Total Liabilities = Net Worth (per banker)

·         Total Assets (per Rich Dad, without doodads) – Total Liabilities = Net Worth (per Rich Dad)

·         Most people don’t prepare personal financial statement – they just try to balance their checkbook. So congratulate yourself. You are now ahead of most of your peers.

·         “Financial intelligence isn’t measured by how much money you make, but how much money you keep, and how hard that money works for you.”

·         Cash flow pattern

·         Poor                 – Income goes right out as expenses

·         Middle Class   – Income is used to pay expenses and liabilities

·         Rich                 – More income and assets than expenses and liabilities

·         “Know where your money goes.”

·         One of the tricks of recordkeeping is knowing what to hold on to and what to throw away.

·         Categories of records you should keep

·         Income

·         Expenses

·         Tax Records

·         Miscellaneous Documents

·         Knowledge is power. Knowledge reduces fear.

·         Adopt whatever system of organization suits you. If it’s user-friendly, you’ll use it.

·         Create a list of any valuable property you own, such as jewelry or silverware, and keep receipts or appraisals with the list. Either photograph or videotape this personal property. Such documentation will help prove your ownership to an insurance agent if anything is stolen or destroyed.