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Financial literacy

Financial literacy is very important for all of us because financial literacy will make a person different from one to another financially. Everyone that want to get rich should know some of the basic of financial literacy.

 In short, financial literacy can be defy as knowing which action is good for our financial and what action is bad for our financial situation. People who is financial literacy and choose to have good financial condition will have great life financially. In other word, these person will have financial freedom, where they have enough money working for them and they have the choice whether they want to work or retire.

 I bring this topic up in this site because I believe that all of us should have the basic of financial literacy therefore the money that we make can attract more money to us. Well, you come here to learn about making more money right? :-)

 In his book ‘Rich Dad Poor Dad’, Robert Kiyosaki point out that it is very important to be financial literacy if we want to be rich. I strongly agree with him about this. Based on the book, he state that we must know the different between an asset and a liability. If we fail to differentiate the two term, we will still able to fall into deep financial pitfall even we can generate lots of money or have lots of income. I believe that this two term is the basic of financial literacy and it will indicate how strong our financial base are, regardless of how much is our income.

 Asset is anything that can generate income to us, whereby the cash flow that coming to us is more than the cash flowing out from us. (this definition is not as many dictionary right?). in this definition, we must stress on the cash flow. This is because sometimes the same product can become asset and it also can become our liability. For example is a website. Our website can be an asset if it can generate income for us more than the expense that we have to maintain (pay) the website which will include hosting, domain name, time spend to create it, internet bill etc. On the other hand, if the expenditure occurred is more than the income from the website, then the website is not our asset.

 The liability is anything that drain money away from us. That mean the more the liability we have, the more money we have to spend… which definitely bad for our financial health. Back to the example above (website). The website that only have lots of expense, without any income is a liability to us.

 Hence, based on this definition, we should look back to our self and try to avoid any liability and start to acquire more and more asset. If currently we have realize that we have lots of liability, we should look for ways to reduce it. We should apply this perspective in every aspect of our life. Everyday, when we wake up in the morning, enjoys our morning and our life. Then, in everything that we want to do or spent, keep remind our self whether do we create another source of asset or do we are building one more liability. I believe that if we apply this in every aspect of our life, we will be able to get rich even we start small. Even, if we can not be a millionaire in short time, the more asset that we have accumulate or create, our financial will become more stable.

How Can Financial Literacy affect our life.

1. Help us to create or buy more asset.
        If we are financial literature, we normally will start to search for an asset and of course more and more asset will be accumulated over some period of time. Some of the asset that can be accumulated may include several business, houses, and some other source residual income.

2. Will prevent us from fall into unnecessary and bad debt.
        Financial literacy will help us avoid unnecessary debt. For example is consumer debt such as credit card debt, and some easy payment scheme is in fact is not good to our financial. We should avoid such consumer debt because it is the best way to drain our money out of our pocket.

3. Prevent us from retire broke.
        Many of us earn good amount if income each month. However, not many of us can save up to 20 percent of the income (on top of normal employee provident fund – which is unavoidable). If we do some math on the money that we save,  most of us end up broke  i.e. not enough to live comfortably after retire. Financial literature will make us aware of this fact and we will look for some asset that can generate income for us even after we retire.

4. Help us to retire early.
        Enough asset will give us a choice to retire early. In his books, Robert Kiyosaki admit that he can choose to retire at the age of 47 because he and his wife Kim, have enough asset to support them. This is consider very early compared to most people who still working at the age of 55 and still didn’t have enough asset.

5. Enable us to obtain financial freedom.

            Financial freedom is very important to anyone that interested in make money work for us. Financial freedom is the situation whereby a person have enough money or asset that work for him and it is not necessary for him to work anymore (no need to wok to earn money for living). This sound impossible to poor and middle class people who their main source of income is employment. However, if we can master the financial literacy, I believe that we also can climb up to the rich which have lots of time and lots of money.

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I have accumulate some useful article in the internet and would like to share with you about what I found. Do feel free to read the article, I strongly believed that you will be benefited from the information.

Are you ready to be fired?

10 step to improve your financial situation

I found that there are many people search for some information regarding financial freedom in the internet. Therefore, I would like to provide some information that I found during my search on the topic. Hope the search information that I provide below can be helpful:

Financial freedom online

Financial freedom resource

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