KIYOSAKI’S 4 LESSONS FOR FINANCIAL LITERACY
Financial literacy simply means the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others.
As adults, most of us know how to read. We’ve gone through the struggle and frustration of becoming literate. Thankfully, that is one thing our schools do well. But for most adults there is one type of literacy that is sorely lacking — financial literacy.
Our schools do well at teaching reading, writing and arithmetic, but they are horrible at preparing people to work with money. Nearly every person who graduates from school is financially illiterate.
Here are four lessons to get you started toward financial literacy as suggested by Robert Kiyosaki:
1. Understand the History of Money .
To understand what will happen in the future, it’s first necessary to understand the past. History is like a train. It is propelled forward in a certain direction with a great deal of momentum. It can’t turn on a dime. If you can see where it’s coming from – and how quickly – then you will have a pretty good idea about where it is going, at least in the short term.
2. Understand Your Financial Statement .
To grow rich, the key is to understand how to read and understand the three parts of your financial statement: profit and loss statement, balance sheet, and cash flow statement.
Many people learn in accounting classes how to read an income statement and balance sheet separately. What is fascinating, however, is that these classes don’t teach why one document is important to the other or how one affects the other. If you can master how to understand the relationship between the income statement and the balance sheet you will quickly understand if an investment is an asset or a liability. Understanding this will allow you to make the right investment every time.
3. Understand Measuring an Asset’s Strength .
A key component of a full financial education is to understand how to measure whether an asset is strong or not. One of the best ways to do this is to refer to the B-I Triangle, which looks at an asset’s full properties: team, leadership, mission, cash flow, communication, systems, legal, and product.
4. Know How to Make Mistakes .
It’s impossible to learn without making mistakes along the way. The key is to learn the lessons of those mistakes, and not let them take you out of the game. Look at failure as a learning opportunity.