Lesson Two: Why Teach Financial Literacy?

- If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve problems, I am afraid those people will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.


- Most people fail to realize that in life, it's not how much money you make, it's how much money you keep.

- In the long run, it's not how much you make, it's how much you keep, and how many generations you keep it.

- If you want to be rich, you need to be financially literate.

- Kids graduate from school with virtually no financial foundation.

- Rule One. You must know the difference between an asset and a liability, and buy assets.

- An asset is something that puts money in my pocket.

- A liability is something that takes money out of my pocket.

- This is really all you need to know. 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.

- The flaw in the thinking of so many people. The flaw is that money will solve all problems. That is why I cringe whenever 1 hear people ask me how to get rich quicker. Or where do they start? I often hear, "I'm in debt so I need lo make more money." But more money will often not solve the problem; in fact, it may actually accelerate the problem. Money often makes obvious our tragic human flaws. Money often puts a spotlight on what we do not know. That is why, all too often, a person who comes into a sudden windfall of cash-let's say an inheritance, a pay raise or lottery winnings-soon returns to the same financial mess, if not worse than the mess they were in before they received the money. Money only accentuates the cash flow pattern running in your head.

- It's called financial aptitude-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.

- More money seldom solves someone's money problems. Intelligence solves problems.

- Many great financial problems are caused by going along with the crowd and trying to keep up with the Joneses. Occasionally, we all need to look in the mirror and be true to our inner wisdom rather than our fears.

- The main reason that most people say "Play it safe' is out of fear

- An intelligent person hires people who are more intelligent than they are.

- When it comes to money, high emotions tend to lower financial intelligence.

- I think a house is not a good investment:

1. When it comes to houses, I point out that most people work all their lives paying for a home they never own.
2. Property taxes.
3. Houses do not always go up in value.
4. The greatest losses of all are those from missed opportunities. If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow pattern.

- In summary, the end result in making a decision to own a house that is too expensive in lieu of starting an investment portfolio early on impacts an individual in at least the following three ways:

1. Loss of time, during which other assets could have grown in value
2. Loss of additional capital, which could have been invested instead of paying for high-maintenance expenses related directly to the home.
3. Loss of education. Too often, people count their house, savings and retirement plan as all they have in their asset column. Because they have no money to invest, they simply do not invest. This costs them investment experience.

- The middle class finds itself in a constant state of financial struggle. Their primary- income is
through wages, and as their wages increase, so do their taxes. Their expenses tend to increase in
equal increments as their wages increase; hence the phrase "the rat race."

- This pattern of treating your home as an investment and the philosophy that a pay raise means you can buy a larger home or spend more is the foundation of today's debt-ridden society.

- The investment is not risky. It's the lack of simple financial intelligence, beginning with financial literacy, that causes the individual to be "too risky.

- As an employee who is also a homeowner, your working efforts are generally as follows:

1. You work for someone else. Making the owner, or the shareholders richer.
2. You work for the government. By working harder, you simply increase the amount of taxes taken by the government.
   
3. You work for the bank. After taxes, your next largest expense is usually your mortgage and credit card debt.

- The problem with simply working harder is that each of these three levels takes a greater share of your increased efforts. You need to learn how to have your increased efforts benefit you and your family directly.

- Have the excess cash flow from my assets reinvested into the asset column.