Several months ago, I was watching my six-year-old grandson for the weekend, and we were playing “Cash Flow for Kids” by Robert Kiyosaki. That’s when I noticed a small book had come with the game called, “Raising Your Child’s Financial IQ,” featuring Sharon L. Lechter (CPA) and Ann Nevin (PhD in Educational Psychology). It’s just a small paperback, and although I’ve read many of Robert Kiyosaki’s books that were published in the series, this, harder to find, book really struck a chord.
Although I’ve been poor, middle class, and wealthy throughout my life, I never really knew why. To some extent we choose to be poor, middle class, or rich depending on the choices we make when each dollar comes through our hands. This simple explanation was literally an “Ah Ha” moment for a guy who likes to think he’s a pretty sophisticated and savvy investor.
It really all begins with our personal financial statement, which is really identical to a P&L (Profit and Loss Statement) and a Balance Sheet. The P&L displays one’s income and expenses. The balance sheet, on the other hand, displays one’s assets and liabilities. Now, the decisions made when a dollar of income comes in and is used for an expense, a liability, or an asset, determines whether we are choosing to be poor, middle class, or rich, respectively. See graphs:
When I was poor, all of my income went to expenses, mainly rent. My housing was by far my biggest expense. All I focused on was my job, getting a better job, or taking on more hours at work. I didn’t have any assets or even liabilities that I thought were assets.
When I became a homeowner, my job paid for the house, which was an expense and a …read more