When we are thinking about normal people (workers, auto-employers or professionals) and their money we have big questions: why don’t they have more money? Why can’t they retire earlier? Why don’t they know anything about how to use money to improve their economic situation and future? All these questions have a common answer: financial education.
In accounting all the things that you own are an “asset”, and they count to your richness. But in rich people’s lives, they are “passives”: all the things that don’t give you money are passives and only the things that give you a benefit are assets. For example: your home is an asset or a passive? You have to pay the mortgage and take care of it, that is only one thing: expenses. If you buy a house and rent it and you can earn money from that, it is an asset. The general problem is that the people believe that they are richer when they have more things to show off to their friends.
In rich people’s heads there are two types of debt: good and bad. The latter is when you take a debt only for fun, for example to buy a new car to impress girls. The former is when that debt helps you to create a new source of income, for example, if you use that car to do deliveries of your business and it increases your sales, it is a good debt.
This subject is very easy, but it is so easy that most people can’t understand it. Savings are your income minus your expenses. To manage your savings, you need to estimate your monthly expenses and think how much you can save. But, why do I want to save money? That isn’t fun. Do you want to enjoy your life? Well, you need to save money to invest it. That will give you a better life.
In the financial world there are a lot of possibilities to invest your money and it is very dangerous because all have risks. Therefore you need to investigate a lot before entering an investment.
When you generate incomes from an investment you have 2 types of earnings:
-Capital incomes: it is when you have something and you sell it. For example, if you bought Amazon stocks at $150 and you sell them at $350, you are generating capital incomes.
-Rent incomes: it is when some business or a financial instrument generates your incomes, it can be the sales of your company or the interest of a bond.
If you have your own business, it’s time to think about how to grow it, sell more and have a good debt.
If you are a professional, think about the same. You are your own business.
You need to investigate more about your incomes, expenses, debt, savings and investments.