Cashflow Blog

It also is critical to look at your overall financial situation to determine if you are getting ahead from one year to the next. A “net worth statement” helps you determine “where you stand” and serves as a measure of your overall financial position.The net worth statement is a summary of your financial position at a particular point in time (on a given date). It is a list of all your financial assets (what you own) and all of your financial liabilities (the debts that you owe). Net worth is the dollar amount you have when you subtract everything you OWE from everything you OWN.

You will need this information when you:

• borrow money;
• apply for a home mortgage;
• determine insurance needs;
• plan your retirement;
• write your will and determine estate planning needs in the event of death, divorce, or remarriage;
• settle a divorce.

What Are Your Assets?

Assets are any financial or material possessions that have monetary value. On the net worth statement the value is listed at the current market value, not what you paid for it. Assets include things such as:

• Cash on hand or in savings accounts (including certificates of deposit or checking accounts)
• Stocks, bonds, mutual funds
• Cash (not face) value of life insurance
• Money others owe to you
• Annuities, retirement plans
• Employee benefits such as company stocks
• Your home
• Other real estate and business interests
• Automobiles, trucks, other vehicles
• Household furnishings, antiques, jewelry, books, coins, artworks, etc.

What Are Your Liabilities?

Liabilities are the financial obligations or debts you owe to other persons or institutions. Included are:

• Mortgages
• Installment loans (cash advances, auto, etc.)
• Department store and credit card debts
• Taxes owed
• Unpaid bills (medical, utilities, etc.)
• Any other liabilities

Figure Your Net Worth

Total your assets and your liabilities. Subtract the liabilities from the assets. The result is your financial net worth.

Now that you have taken the time to calculate your net worth, how do you feel about your financial situation? Happy? Relieved? Discouraged?

If you are a bit discouraged, do realize that a negative net worth statement may easily happen to someone just starting out on their own or to young families. Just as a photograph shows how you looked at one specific time, so too, the net worth statement reflects your financial situation at only one point in time. It should be updated at least once a year or as your financial situation changes.

 If you are not satisfied with your net worth and want it to grow, develop a plan to increase it. More income, lower living expenses, and/or more investment growth are some alternatives.

To increase your savings you may have to cut spending in some areas. Also, make sure that your savings and investments are yielding the best financial return for your situation. You may want to reduce your present debt level by making regular payments and not adding any other debts. These are more specific examples that may result in increasing your net worth.

If you are like most people, your overall goal will be to increase your net worth each year. Developing a financial plan means taking control of what you have now and disciplining yourself to manage your money to reach these goals you have set for yourself and your family.

See the original post here:
What is Net Worth?

An excerpt from my ebook “The Way of the Radical Business”:

to get a copy for yourself go to - www.tadhargrave.com (sign up on left hand side)

The Four Things Most Entrepreneurs Need:

I find that there are three things most of the entrepreneurs I meet need. Maybe you can relate to this:

First is Empathy: Hell, being an entrepreneur can be hard. We can work so hard and take failure or rejection so personally. We can work so hard for so little money.

Second is Context: They need a map to help them understand where they are. They need to understand where they’re strong and weak. They need a clear diagnosis that helps make sense of their symptoms. All they know is that some things just aren’t working. But they don’t know why. They’re lost and they don’t know where they are. They need someone to help them understand where they are and why.

Third is Options: Once they feel heard and understand where they are - they need to understand the various options for getting to where they want to be. This is where more information, reading books, listening to audios can be helpful. It’s a general level of solutions. From this they can begin to pick and choose what feels relevant. This level is about learning the language in a certain arena. They start learning the general principles of marketing, some of the core strategies and tactics and maybe even hear a lot of examples.

You can start to feel really powerful, like you now know how to navigate the terrain. You walk a bit taller. But at a certain point it becomes clear that the more you learn, the more you know you don’t know. You become increasingly aware of where you’re still ignorant. And you start to suspect that you need more than just guidance.

Fourth is Guidance: In many ways, this fourth level is what they were really after when they were looking for options. At the end of the day, they can get too many options. So many that they feel overwhelmed and immobilized. “Overwhelmed by insurmountable opportunity” as Pogo said. I find that most people are silently begging to be led. They’re craving for someone to take their hand and walk them from where they are to where they want to be.

They don’t always want this guide to make the decisions for them (though often they do), but they do want someone who can not only explain the options but also give them their best advice and opinions on what would be best. And guidance can only be done one on one - in a personal relationship.

You just can’t get guidance by reading a book or listening to some audio or watching a video. That just becomes more information. And more overwhelm. In fact, all of these levels are more powerful when it’s person to person. You can get a general level, a surface level, of all of these through books and online - but working with a coach or mentor will be, obviously, far more powerful.

After they’ve absorbed enough information (and for some people it’s more than others) a question begins to surface: “How does this apply to me?” They understand that it works - and why - but they are still struggling to make that principle fit into their business.

But you need to go through these four stages in order. You’ve probably experienced this where someone tried to give you guidance without any real empathy or diagnosis and it felt awful.

If all you do is get empathy - you’re still stuck.

If you get empathy and context but no new information - all you know is what’s wrong but you feel lost about how to solve it. A lot of flailing about can happen here.

In terms of empathy - I hope this ebook provides a little for you.

In terms of context - there are two diagnostic tools (‘The Horrible Hundred’ + and ‘The Radical 180’) you can use to give you an overview of where you are.

In terms of options and information - there’s a lot here to start you off.

In terms of guidance - I’m afraid this ebook won’t be of very much help at all. Isn’t that rotten news? Ah well. It’s a start.

In fact, let’s start off with one of the core principles I base all my marketing and marketing coaching on.

More here:
The Four Things Most Entrepreneurs Need:

People don’t want information. Ultimately, they want guidance.

If you think you’re selling them a product or a service - think again. You are selling them a point of view a perspective.

Let me explain: they are suffering from whatever symptoms they have (e.g. not enough clients, lower back pain, an angry wife threatening divorce, inability to get pregnant).

But - why do they have this problem? And what will it take to fix it?

Does it make sense to you that there are a myriad of ways to solve any problem? Dozens of lenses to even put on it? And, does it make sense that the lense you put on it might shape the treatment you offer?

Let’s take the general example of ‘illness’. There’s many theories on what causes it:

An inconsistency between the will of the soul and the will of the personality:

o Karma
o Genetics
o Bad diet
o Stress
o Excessive acidity in the system
o Fear

Etc. I know some people who think that what you eat is almost irrelevant to your health. I know others who think that food is the only thing that matters.

Here’s the point for you: what is YOUR perspective on why your clients are struggling with their challenges? What’s your point of view? What’s your opinion and perspective?

Here’s what people want:

1. empathy and understanding for their symptoms
2. a clear, well thought out point of view on why they have these symptoms that doesn’t cause them to feel ashamed and stupid. Something that makes sense to them.
3. clear and personalized guidance on what to do about it.

Your job is to do those three things.

Your job is to make your case as to why your perspective is correct. Not to convince them - but just so they understand where you’re coming from and what kind of help they’re likely to get from you. You can’t just say, “Take these pills.” First they need empathy. Then you need to explain your understanding of how things got the way they did. Then you need to share exactly what you think they need to do to resolve it. And of course, engaging them in this conversation is critical.

They don’t want to have to read through hundreds of pages of books and e-books. They don’t want to have to listen to hours of downloadable audios. They don’t want to sit through a weekend seminar. They want someone to give them insight into their own situations. They want you to hold their hand. They want personalized, customized advice.

Always remember this: People don’t want information. They want guidance.

More:
People Want Guidance, Not More Information

1. Build Your Mental Wealth Muscles

This is my absolute favorite lesson from the book. The author would constantly hear his poor dad saying, “I can’t afford that.” However, his rich dad said that instead of saying you can’t afford something, ask yourself…

“How can I afford this?”

The first statement requires no thinking. You want something. You don’t have enough money. Therefore, you can’t afford it.

The second statement is so much better. You want something. You don’t have enough money. So, let’s find some way that I can create enough money to be able to afford it. The difference between these two statements is incredible!

“Forcing yourself to think of how to make extra money is like going to the gym and working with weights. The more you work your mental muscles, the stronger they get.”                

- Robert Kiyosaki, author “Rich Dad, Poor Dad”

So, let’s say you wanted to buy a new big screen TV, but you don’t have enough money. What can you do to be able to afford it? Let’s come up with a plan…

I don’t know you, but I bet one thing you could do is find some unneeded junk around the house and sell it on eBay. With that alone, I bet you would have enough for your big screen. Or, at least half of it anyways!

Another thing you could do is start a savings plan for it. I bet you could easily save five dollars here or five dollars there. Cut back a little on your usual spending habits. Then, use those savings to help pay for the big screen.

The point is, next time you want something you can’t afford, use your mental wealth muscles to find ways that will make you be able to afford it. The more you use these muscles, the better they get. And the more money you will find yourself accumulating.

2. Increase Your Financial Intelligence

It’s a fact, schools don’t teach students nearly enough about money as they should. You learn history and you learn how to find what x is equal to, but you never learn what financial options that you have.

I’ve learned that increasing your financial intelligence is a self-study. High school or college is never going to teach you as much as you should know. You’re going to have to pick up the books and learn it yourself. So…

What areas of financial intelligence do you need to learn? Rich dad suggests four main categories. Those are…

1. Accounting - You’ve got to be able to read financial statements.
2. Investing - You have to learn to grow your assets until you are financially free.
3. Understanding Markets - You have to know supply and demand and how to take advantage of it.
4. Law - You need to learn to protect yourself. And also know what you are and aren’t allowed to do.

Being heavily schooled in these four subjects is essential towards wealth. You’ve got to go to the library or go online and find books on these subjects.

One thing is certain, you can never learn enough about these subjects. It should be a lifetime study. Each book you will read will hopefully give you one more piece to the financial puzzle. With each book you read, you will learn something new that will help you on the road towards financial independence.

It doesn’t matter where you are at financially right now. Get started learning what very few people know about acquiring wealth.

3. Spend More Money On Assets, Less On Liabilities

Rich Dad, Poor Dad talks heavily about distinguishing between an asset and a liability.

In case you don’t know, an asset is something you buy that grows in value over time. A liability is something that loses value over time.

The best example of a liability that I know of is your car. With every time you drive it, it loses value. The mileage that it accumulates makes it worth less and less, should you ever decide to sell it.

Most people spend a majority of their income on liabilities. Whether it be a car, a nice new TV, video games, etc. You should spend as much as you possibly can on assets instead of liabilities. So, what are some examples of assets that you can buy? Well, there are basically four main categories…

1. Investing - Whether it be in stocks, bonds, or anything else. A smart investment will grow largely in value for you over time.

2. Business - You can save up money to start your own business. This is a great asset that can earn you a ton of money. You can even hire other people to run the business for you, you just need to have the money to get it started.

3. Real estate - The fact is that many people make a fortune through real estate. It’s a high-risk, high-reward kind of business.

4. Other - Anything that you think will grow in value over time, and you enjoy buying, is a great asset for you. For example, if you love collecting baseball cards, they will be worth a lot more 40 years from now than they are today.

Do everything possible to set up multiple streams of income. By having as many assets working for you as you possibly can, your money will start to grow for you exponentially. The more you have invested, the faster it will grow.

Be smart and make it a habit of spending as much as you can on assets , and as little as you can on liabilities.

4. Why You Should Own A Business

There is a big difference between owning your own business and working for one. This big difference, for the most part, deals with taxes.

Taxes are the largest expense for a majority of people. It can easily cost you 30% if your income. Meaning that you are working 3-4 months out of the year just so you can pay for taxes.

When you work for a company, there is very little you can do about this tax situation. It’s basically inevitable that you are going to have to pay the maximum in taxes. However…

If you have your own business, you have many more options!

The greatest loophole there is when it comes to taxes is tax deductions. When you have your own business, anything that is considered a business expense can be put as a tax deduction, which further decreases the amount of taxes that you have to pay.

From my own experience with building websites (a home-based business), tax deductions have done wonders for me. All of my hosting fees, my high-speed Internet, and all of the personal development books that I purchase are all tax deductible!

Many of these things I would purchase even if I didn’t have a website to run. But because I do have an income-producing website, it makes these things tax deductible! Saving me lots of money whenever tax time comes around.

Even if you own a business, you are still probably going to have to pay some taxes. But the percentage that you are going to pay will be far lower when compared to what you would have to pay if you worked for a business instead of owning one!

5. Get A Job To Learn

Most people get a job to earn a paycheck. But a better way to think about getting a job is what you will learn from it.

Having a job is an opportunity to get first-hand experience learning and applying new skills. By having a job, you get to learn time management so you can get as much done as possible. You also improve communication skills when you interact with other employees.

Everything about a job can be used as a learning experience.

Choose a job, not for how much it pays, but for what you will learn from it. If a job will teach you the skills that will help you make a fortune later in life, then don’t worry about how much it is paying you. It will work out in the end.

Basically, keep the long term future in mind when you are choosing a job. Is this job going to help you in the long term? If it isn’t, it’s time to go searching for something that is.

6. Why You Should Pay Yourself First

You’ve probably heard the term “pay yourself first” before. But if you haven’t, it basically means to set aside some of your income first, before you pay your bills and the other things you have to pay for.

So, if you decide to save 10% of your income, you first take 10% out of your paycheck, then you do your best to live off of the other 90%.

It’s easy to see why this is a great strategy. Especially if you use that 10% to buy assets that will help you become financially free. But what are some of the other advantages of “paying yourself first.” Well…

As we have already learned, it’s important for us to build our “mental wealth muscles.” And, as it turns out, paying yourself first is a great way to build those muscles.

You probably already have a strong motivation to pay all of your bills on time. That way you don’t have to pay any late fees, or receive phone calls asking where the check is. Well, when you pay yourself first, you have even less money to pay off those bills! So, the secret is you can use that motivation to help you find ways to be able to pay your bills on time.

Whether it be reducing your spending, or finding ways to earn more money, either way it works out very nicely for you!

By paying yourself first, you force yourself to be better with money so you can still pay your bills on time. And not only that, it’s nice psychologically when you know that a percentage of your income is yours to keep! I don’t know about you, but I like thinking that my money is mine and that nobody can take it from me.

Pay yourself first. Set aside 10-20% of your income and live off the rest. This will automatically force you to be smarter with money and also build your mental wealth muscles to find ways of earning yourself a fortune.

View post:
Money Lessons From Rich Dad

~ Justin McHenry ~  

Robert Kiyosaki is back with another in his “Rich Dad” line of books; this one’s called Chicken Soup for the Rich Dad’s Soul. Just kidding.

But the Rich Dad theme has been beaten about as often as the Chicken Soup horse at this point, so if you’ve read Kiyosaki’s other books, you can expect about 50% new material and 50% recycled ideas.

And if you expect more than that, you need to learn a thing or two about brand extension.

Anyway, the new book is titled Increase Your Financial IQ, and from this point forward I will discuss it on its own merits, regardless of what may have come before.

Increase Your Financial IQ has at its core Kiyosaki’s 5 main aspects of financial genius:

1. Making More Money
2. Protecting Your Money
3. Budgeting Your Money
4. Leveraging Your Money
5. Improving Your Financial Information

This core section is pretty good; Kiyosaki has a lot of words of wisdom here. In terms of making money, his biggest advice is to get yourself to a place where your income is not entirely predicated on trading hours for money, i.e., only getting a paycheck for hours worked. Whether that means you’re a full-time entrepreneur or you use your extra money to create passive income (owning rental property for instance) is up to you.

Protecting Your Income covers everything from taxes to estate planning to prenuptial agreements. Thinking about who might put their hand in your pocket is important, although I think Kiyosaki goes off the rails a bit through his tired tirades against 401(K) investing (or really against any investing that isn’t real estate or gold). One piece of advice I heartily agree with is that railing against the tax system is a waste of time:

“I am not trying to change the system. My personal philosophy is that it is easier to change myself than to change the system.”

Budgeting Your Money is the strongest chapter in the book. Despite the name, this chapter isn’t really about listing your income and all your expenses and figuring out how to make it all work.

It’s more about a way of thinking, a philosophy that forces you to pay yourself first and put the money you’ve paid yourself into assets that make you more money. It’s sort of a “no excuses” budget in that Kiyosaki says if your income isn’t enough to finance your expenses, you’d better make some more income. Your budget should demand that you take some of your capital and put it to work, regardless of which bill collector may be coming after you.

Leveraging Your Money is little more than a case for why you should invest in real estate. I can’t take issue with its truths, but as I’ve said in the past, not everyone wants to deal with being a real estate owner. Yes, it may be a way to do well financially. But by making it sound as if it’s the ONLY way, Kiyosaki and other financial writers shortchange people who want to do well financially while also spending their career or free time on pursuits for which they have a real passion.

Improving Your Financial Information is sort of a mish-mash of thoughts and ideas, but makes for interesting reading.

Kiyosaki has strong opinions that are articulated in a lively way, so even if you disagree with him, his books keep you engaged. They do a nice job of inspiring you to get out there and make something happen.

That said, there’s a lot of filler in Increase Your Financial IQ. The last 50 pages could have been lopped off without being missed, and the first 30 pages could have been condensed into about 5 pages. Sure, some of the stuff covered in these sections is interesting, but there’s nothing more maddening in a personal finance book than to feel the author is saying the same thing 40 different ways in order to come up with 40 extra pages.

Despite its flaws, Increase Your Financial IQ is worthwhile reading. Rich Dad fans will likely eat it up, but it’s good food for thought for anyone, provided you don’t make the mistake of thinking that because Robert Kiyosaki is wealthy his path to wealth is the only one available.

Continued here:
Book Review: Increase Your Financial IQ by Robert Kiyosaki