What is the foundation of wealth? Financial Statements | MASTER INVESTOR | FINANCIAL EDUCATION

What is the foundation of wealth?

SHORT ANSWER: The ability to understand and read financial statements, starting what our own.

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However, it does not matter whether we have any assets or not, we all have a personal financial statement.

The Financial Statement: Our Foundation for Being Wealthy. What is the foundation of wealth?

The key to financial success is understanding our personal financial statement.
This is perhaps the most important question you can ask and answer. For most people, being rich means making a lot of money. They think that if they can just make a little more each month, all their problems will be fixed. They’ll live like kings and queens. What is the foundation of wealth?

Financial literacy begins by understanding your personal financial statement
The reality is that money doesn’t make us rich. What does make us rich is our financial IQ. Give the same $100,000 to a person with a low financial IQ and a person with a high financial IQ, and we guarantee to see a vast difference in how that money is spent and grown.

Central to the difference between those with low and high financial IQs is a simple but profound literacy: the ability to understand a financial statement.

One of the most important things you need in order to be financially successful is to know how to read an income statement and balance sheet.

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But even more important is understanding the relationship between them. We can see that in the Master Investor personal financial statement, which anyone can use and download here.

Many people who take accounting classes learn how to read an income statement and balance sheet separately. We have always found it fascinating, however, that these classes don’t teach why one document is important to the other or how they affect the each other.

We have felt that the relationship between the two was critical. How can we understand one without the other? How can we tell what an asset or liability really is without the income column or the expense column? we may asked.

For us, understanding the relationship between the two allowed us to easily see the direction of our cash flow to easily determine if something was making us money or not.

If something was making money, it was an asset. If not, it was a liability.

Just because something is listed under the asset column does not make it an asset. The reason people suffer financially is that they purchase liabilities and list them under the asset column.

It's not about what we make (income), but how much we keep (expenses)
For most people, the idea of a high income is a good thing. For the wealthy, it is bad. For most people, the idea of low expenses is a good thing. For the wealthy, again, it is bad. In fact, it’s only the financially unintelligent who think that “making a lot of money” in the form of earned income is a good thing. These are usually high paid employees like C-suite holders. They may seem rich, but they think like the poor.

As we say here, “Money is just an idea.”

An asset puts money in your pocket. A liability takes money out of your pocket.

The simple definition of a fake asset is one that promises to make us richer but in actuality robs us blind. We need three things:

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Then, we need to offer something of value in exchange for their email and name. Then, after we obtained the visitors of our capture page's information and email address. Then, we can deliver the free gift and also give them the product/solution of their problem.

Where to get products to sell that are already made for us? We do not need to create the products or sales pages, we can have use leverage by using other people's products that are already made for us. All we need to find the products we are passionate about marketing and bring new clients to the sales pages of those products.

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