It's Movie Monday with a discussion of Debt Limits. While this is satirical to the government, I've seen many households that operate about this way.
Monday, February 13, 2012
Wednesday, February 8, 2012
WW: Net Worth
Welcome to Word Wednesday. The word of the week (which is really two words) is Net Worth.
Now that we've discussed what Money is, the differences between Rich and Wealthy and what Assets and Liabilities are, these all come together to make up Net Worth. Your Net Worth is basically the sum of your Assets less your Liabilities. However, the definition of Assets and Liabilities can make a huge difference in what you think your Net Worth is.
The Banker's definition of Net Worth would be to add up everything you could sell (for what you could sell it for), add in your cash and subtract your debts. So add up the value of your home, cars, boats, golf clubs, furniture, etc. plus your bank accounts and then subtract the total of your debts. While for many people this number is not comforting (many people are upside down, which is to say they owe more than they could possibly pay), it is more comforting that the Kiyosakian Net Worth.
Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that Assets pay you and you pay Liabilities. When you use those definitions to determine your Net Worth, you get a better picture of where you actually are financially. Another way to look at it is that Bankers look at a Richness Net Worth while the Kiyosakian view looks at Wealthness Net Worth. Rich is temporary. Wealth is lasting.
Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.
Benjamin Franklin
Now that we've discussed what Money is, the differences between Rich and Wealthy and what Assets and Liabilities are, these all come together to make up Net Worth. Your Net Worth is basically the sum of your Assets less your Liabilities. However, the definition of Assets and Liabilities can make a huge difference in what you think your Net Worth is.
The Banker's definition of Net Worth would be to add up everything you could sell (for what you could sell it for), add in your cash and subtract your debts. So add up the value of your home, cars, boats, golf clubs, furniture, etc. plus your bank accounts and then subtract the total of your debts. While for many people this number is not comforting (many people are upside down, which is to say they owe more than they could possibly pay), it is more comforting that the Kiyosakian Net Worth.
Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that Assets pay you and you pay Liabilities. When you use those definitions to determine your Net Worth, you get a better picture of where you actually are financially. Another way to look at it is that Bankers look at a Richness Net Worth while the Kiyosakian view looks at Wealthness Net Worth. Rich is temporary. Wealth is lasting.
Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.
Benjamin Franklin
Monday, February 6, 2012
MM: US Debt Crisis
Movie Monday with a sobering point of view on debt. It's not good on a personal level. It's definitely not good on a national level. On a worldwide level, it's very bad.
Wednesday, February 1, 2012
WW: Liability
Welcome to Word Wednesday. The word this week is Liability.
As with Asset, Liability has several meanings in actual use. Bankers typically just consider debts to be liabilities. Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that a liability is anything that continually drains money from your accounts, or as he states it "Assets feed you, Liabilities eat you."
Now that we've talked about both assets and liabilities, let's look at some Kiyosakian views in our personal lives. Homes would be liabilities, as there is not only a mortgage, insurance and property tax but also maintenance. A stock with a dividend would be an asset, as it is paying you on a regular basis. Royalties would be in the same classification. You do the work up front, and receive income for a period of time after that.
If you change your financial view of your world to these definitions of Assets and Liabilities, it gives you a more realistic view of where you stand. If you then focus on acquiring assets and divesting liabilities, you will better be able to weather life's storms as they come.
For we must be one thing or the other, an asset or a liability, the sinew in your wing to help you soar, or the chain to bind you to earth.
Countee Cullen
\ˈlī-ə-bəl, especially in sense 2 often ˈlī-bəl\
As with Asset, Liability has several meanings in actual use. Bankers typically just consider debts to be liabilities. Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that a liability is anything that continually drains money from your accounts, or as he states it "Assets feed you, Liabilities eat you."
Now that we've talked about both assets and liabilities, let's look at some Kiyosakian views in our personal lives. Homes would be liabilities, as there is not only a mortgage, insurance and property tax but also maintenance. A stock with a dividend would be an asset, as it is paying you on a regular basis. Royalties would be in the same classification. You do the work up front, and receive income for a period of time after that.
If you change your financial view of your world to these definitions of Assets and Liabilities, it gives you a more realistic view of where you stand. If you then focus on acquiring assets and divesting liabilities, you will better be able to weather life's storms as they come.
For we must be one thing or the other, an asset or a liability, the sinew in your wing to help you soar, or the chain to bind you to earth.
Countee Cullen
li·a·bil·i·ty
noun \ˌlī-ə-ˈbi-lə-tē\
plural li·a·bil·i·ties
Definition of LIABILITY
1
a : the quality or state of being liableb : probability
2
: something for which one is liable; especially : pecuniary obligation : debt —usually used in plural
3
: one that acts as a disadvantage : drawback
li·a·ble
adj\ˈlī-ə-bəl, especially in sense 2 often ˈlī-bəl\
Definition of LIABLE
1
a : obligated according to law or equity : responsibleb : subject to appropriation or attachment
2
a : being in a position to incur —used with to <liable to a fine>b : exposed or subject to some usually adverse contingency or action <watch out or you're liable to fall>
Wednesday, January 25, 2012
WW: Asset
Welcome to Word Wednesday. The word this week is Asset.
The common usage of Asset is anything you could sell for money. For instance a banker will ask you what your assets are, and will look for houses, cars, boats, furniture and even golf clubs. They are looking for an answer to the question, "If you stop paying me, what can be sold to cover your debt to me?"
I find this usage of asset a bit misleading. Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that assets generate you income, or as he states assets feed you. The idea is that if something is costing you money to own, it's not really an asset.
Take a house, for instance. Even if you sell your house, you'll need somewhere to live (although your parents basement may be an option, that comes with a different price). And homes cost money, a lot of money. Property taxes, interest payments, insurance, upkeep, maintenance, decorations, cleaning, etc. So while the banker has no problem with you going to live in your parent's basement to cover his loan to you, you'd be better off to look at things that generate you income (especially passive income) as an asset. Don't fool yourself.
I always felt that my greatest asset was not my physical ability, it was my mental ability.
Bruce Jenner
The common usage of Asset is anything you could sell for money. For instance a banker will ask you what your assets are, and will look for houses, cars, boats, furniture and even golf clubs. They are looking for an answer to the question, "If you stop paying me, what can be sold to cover your debt to me?"
I find this usage of asset a bit misleading. Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that assets generate you income, or as he states assets feed you. The idea is that if something is costing you money to own, it's not really an asset.
Take a house, for instance. Even if you sell your house, you'll need somewhere to live (although your parents basement may be an option, that comes with a different price). And homes cost money, a lot of money. Property taxes, interest payments, insurance, upkeep, maintenance, decorations, cleaning, etc. So while the banker has no problem with you going to live in your parent's basement to cover his loan to you, you'd be better off to look at things that generate you income (especially passive income) as an asset. Don't fool yourself.
I always felt that my greatest asset was not my physical ability, it was my mental ability.
Bruce Jenner
as·set
noun \ˈa-ˌset also -sət\Definition of ASSET
1
plurala : the property of a deceased person subject by law to the payment of his or her debts and legaciesb : the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts
3
a : an item of value ownedb plural : the items on a balance sheet showing the book value of property owned
4
: something useful in an effort to foil or defeat an enemy: asa : a piece of military equipmentb : spy
Monday, January 23, 2012
MM: What's Your Excuse?
Movie Monday with Nick Vujicic. I have no excuses. What is holding you back? Why is it holding you back? What do you do to reevaluate your stumbling blocks on a regular basis?
Wednesday, January 18, 2012
WW: Wealthy
Welcome to Word Wednesday. The word of the week is Wealthy.
Last week we talked about Rich. Most people would consider wealthy and rich to be the same. Robert Kiyosaki, in his book Cash Flow Quadrant, defines wealth as the number of days you can survive without actively working for income. I like this definition. This ties together having the thinking to manage your resources as well has having the resources to meet your needs.
So, for instance, if you had $20,000 in savings and you spend $5,000 a month, your wealth would be 4 months. Now if you had some passive income, say a royalty or some other form of income that does not require your active participation, you can stretch that $20,000 even further. Let's say you had $1,000 a month passive income, then you'd be 5 months wealthy.
If the median household net worth in the United States is around $120,000 and most people have the majority of their net worth tied up in real estate (their home), how wealthy is the average American? I've heard it said that most people are 90 days from bankruptcy. In other words, if they were unable to actively provide for their income, they would be bankrupt after 3 months.
There are three ways you can increase your wealth. You can spend less (although there is a limit to that), you can make more and you can build up more passive income. I'd recommend doing all three. Imagine if you could get a year's worth of expenses in savings (by decreasing what you spend and increasing what you earn). How much freedom would that give you? How would that affect your daily decisions? That would make you "rich," however, you would be 1 year wealth. Now imagine if you created enough passive income to cover your expenses each month. What would that do for you. The difference is that now you would be infinitely wealthy.
Now, most people can figure out a way to turn infinite wealthy into a smaller number (increase spending), but that wouldn't be any fun.
I refuse to feel guilty. I feel guilty about too much in my life but not about money. I went through periods when I had nothing, so somebody in my family has to get stinkin' wealthy.
Jim Carrey
Last week we talked about Rich. Most people would consider wealthy and rich to be the same. Robert Kiyosaki, in his book Cash Flow Quadrant, defines wealth as the number of days you can survive without actively working for income. I like this definition. This ties together having the thinking to manage your resources as well has having the resources to meet your needs.
So, for instance, if you had $20,000 in savings and you spend $5,000 a month, your wealth would be 4 months. Now if you had some passive income, say a royalty or some other form of income that does not require your active participation, you can stretch that $20,000 even further. Let's say you had $1,000 a month passive income, then you'd be 5 months wealthy.
If the median household net worth in the United States is around $120,000 and most people have the majority of their net worth tied up in real estate (their home), how wealthy is the average American? I've heard it said that most people are 90 days from bankruptcy. In other words, if they were unable to actively provide for their income, they would be bankrupt after 3 months.
There are three ways you can increase your wealth. You can spend less (although there is a limit to that), you can make more and you can build up more passive income. I'd recommend doing all three. Imagine if you could get a year's worth of expenses in savings (by decreasing what you spend and increasing what you earn). How much freedom would that give you? How would that affect your daily decisions? That would make you "rich," however, you would be 1 year wealth. Now imagine if you created enough passive income to cover your expenses each month. What would that do for you. The difference is that now you would be infinitely wealthy.
Now, most people can figure out a way to turn infinite wealthy into a smaller number (increase spending), but that wouldn't be any fun.
I refuse to feel guilty. I feel guilty about too much in my life but not about money. I went through periods when I had nothing, so somebody in my family has to get stinkin' wealthy.
Jim Carrey
wealthy
adj \ˈwel-thē also ˈwelt-thē\
wealth·i·erwealth·i·est
Definition of WEALTHY
wealth
noun \ˈwelth also ˈweltth\Definition of WEALTH
2
: abundance of valuable material possessions or resources
3
: abundant supply : profusion
4
a : all property that has a money value or an exchangeable valueb : all material objects that have economic utility; especially: the stock of useful goods having economic value in existence at any one time <national wealth>
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