Reading: Your Net Worth and Your Personal Balance Sheet Slides

LESSON 7:  YOUR PERSONAL BALANCE SHEET & NET WORTH

Read: Why Teach Financial Literacy

“Money without financial intelligence is money soon gone.”

“It’s now how much money you make, it’s how much money you keep.”

Review of Key Concept: Net Income

  Earnings

- Expenses

     ==============

= Net Income

Net Income is the difference between what you Earn and what you Spend.

What Makes the Difference Between
The Rich vs. Middle Class vs. Poor

Poor = Net Income of (-). 

They spend more than they earn. 

They borrow to buy the things they want.

Middle Class = Net Income of (0). 

They live paycheck to paycheck.

They do not borrow, but do not save.

They spend every dollar they earn.

Rich = Net Income of (+).

They save a part of all they earn.

They live under their means.

They are smart and patient and know the key to wealth is savings and investment. 

Rich vs. Middle Class vs. Poor

Poor 

  Earn     $100 

- Spend $101

_{======================}

₌ Borrow ($1)

Money is Like a Seed
Where Will You Be When You Turn 80?

Poor 

  Earn     $100 

- Spend $101

_{======================}

₌ In Debt ($100k’s)

Breakthrough Thought:
Do Not Confuse Assets & Liabilities!

Assets: An asset puts money in your pocket

Liabilities: A liability takes money out of your pocket

Net Worth: The difference between Assets and Liabilities

“If you want to be rich, accounting could be the most important subject you should learn.”

–  Robert Kiyosaki

What is a Balance Sheet?

“If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities.  Its not knowing the difference that causes most of the financial struggle.”

–  Robert Kiyosaki

Money Makes the World Go Around

“To get the maximum benefit out of money, what we need to do is to create mental cash flow patterns that will guide your thoughts so that your money will flow in the direction that you want it to go.”

–  Alex Barron

Cash Flow Pattern of an Asset

Why the rich get richer

Cash Flow Pattern of a Liability

Why the poor get poorer

Cash Flow Pattern of the Poor

Money burns in their pocket. Money is spent to survive.

Cash Flow Pattern of Middle Class

Living Paycheck to Paycheck – Caught in the Rat Race. Money is spent to pay off liabilities.

Cash Flow Pattern of the Rich

The rich buy assets. Money works for them.

The Cash Flow Tells the Story!

The cash flow is the story of how a person handles their money, what they do after they get the money in their hand.

More money will not solve your problems. Money only accentuates the cash flow pattern running in your head.

 What is missing from education is not how to make money, but how to spend money. – what to do after you make it.

 Financial aptitude is what you do with the money once you make it, how to keep people from taking it from you, how long you keep it, and how hard that money works for you.

Most people do not understand cash flow. A person can be highly educated, professionally successful, and financially illiterate!

–  Robert Kiyosaki

Don’t Let the Power of Money Work Against You!

 The poor and middle class all too often allow the power of money to control them. By simply getting up and working harder, failing to ask themselves if what they do makes sense, they shoot themselves in the foot as they leave to work every morning. By not fully understanding money, the vast majority of people allow the awesome power of money to control them. The power of money is used against them.

–  Robert Kiyosaki

TRANSFORMATIONAL THOUGHT:
What is the Goal of Financial Freedom?

 The goal of financial freedom is to reach the point at which the income you make from your assets is greater than the expenses you require to maintain your lifestyle.  So the goal of a financial freedom program is to acquire assets and build a portfolio of assets that will eventually enable you to earn enough to do what you want to do without having to work or worry about how you will make a living.

–  Alex Barron

What’s in a Balance Sheet?

ASSETS

Cash, Gold

Stocks, Bonds

Real Estate

PURCHASES

House

Cars

Furniture

How to Determine Net Worth?

EQUITY = ASSETS + PURCHASES - LIABILITIES

NET WORTH = OWN - OWE

Balance Sheet for Most People

ASSETS

FINANCIAL ASSETS

Job

Checking Account       $1,000

PURCHASES

Car                              $30,000

Home                        $160,000

============+=============

TOTAL ASSETS              $191,000

LIABILITIES

“GOOD” LIABILITIES

Student Loan   $50,000

“BAD” LIABILITIES

Credit Cards       $20,000

Car Loan $40,000

Home Mortgage       $155,000

===========================

TOTAL LIABILITIES           $265,000

NET WORTH =                ($74,000)

What’s in Your Intangible Balance Sheet?

Intangible Assets

Education

Work Ethic

Job

Business

Decisions

Opportunities

Reputation

Experience

Your Intangible Balance Sheet

“BE” ASSETS

Reliability

Honesty

Faithfulness

Punctuality

Persistence

Commitment

Your Intangible Balance Sheet

“BELIEVE” ASSETS

Money is a Tool

Stewardship Mentality

God’s Will is Prosperity

God Has a Purpose for My Life

Your Intangible Balance Sheet

“THINK” ASSETS

Positive Mental Attitude (PMA)

Abundance Mentality

Positive Perspective = How You “See” the World

Recognize Opportunities

Your Intangible Balance Sheet

“KNOW” ASSETS

Education

Knowledge

Information

Skills

Experience

Your Intangible Balance Sheet

“DO” ASSETS

Opportunity

Decision Making

Action!

Your Intangible Balance Sheet

“PEOPLE” ASSETS

Family

Mentors

Clients

Co-Workers

Employees

Suppliers

Your Intangible Balance Sheet

“HAVE” ASSETS

Job or Work

Business

Real Estate

Home

Cars

Insurance

Your Intangible Net Worth

“EARN” ASSETS

Name

Reputation

Track Record

Experience

Credit History

“Real” Balance Sheet - Bad

ASSETS

“INTANGIBLE” ASSETS

Hard Work Ethic

Honesty

Family

Health

Traditional Education

FINANCIAL ASSETS

Job

Checking Account      $1,000

PURCHASES

Car                 $30,000

Home                        $200,000

===================================

TOTAL ASSETS           $231,000

LIABILITIES

“INTANGIBLE” LIABILITIES

Victim Mentality, Comfort Zone

Bad Habits, Addictions, Wrong Friends

Fears, Doubts, Insecurity

Bad Attitudes, Character Flaws

“GOOD” LIABILITIES

Student Loans     $80,000

“BAD” LIABILITIES

Credit Cards       $20,000

Car Loan        $40,000

Home Mortgage       $195,000

====================================

TOTAL LIABILITIES             $335,000

NET WORTH =            ($104,000)

“Ideal” Balance Sheet - Good

ASSETS

“INTANGIBLE” ASSETS

YOU ARE YOUR BEST INVESTMENT!

Prosperity and Abundance Mindset

Positive Mental Attitude

Dreams, Vision, Purpose, Goals, Destiny, Direction in Life, Sense of Destiny

Work on Your Business

FINANCIAL ASSETS

Checking Account                            $100,000

Savings Account                           $100,000

“Your Own Bank” Policy                $1,000,000

Your Own Business    $1,000,000

Investments    $1,000,000

Real Estate Investments       $700,000

PURCHASES

Car                         $100,000

Home                         $1,000,000

=======================================

TOTAL ASSETS                          $5,000,000

LIABILITIES

“INTANGIBLE” LIABILITIES

“GOOD” LIABILITIES

Student Loans          $0

Investment Loans $0

“BAD” LIABILITIES

Credit Cards       $0

Car Loans          $0

Home Mortgage                 $0

=========================================

TOTAL LIABILITIES            $0

NET WORTH =                $5,000,000

CONCLUSION: How Is Your Balance Sheet?
What is Your Net Worth?

Questions? Thoughts?