Therapy Business and Finance

Posts Tagged ‘Financial’

Businesses operate to achieve various goals. To meet these goals a business must achieve two primary objectives: To acquire a satisfactory profit and to remain solvent (be healthy to pay its debts). If a business fails to meet either of these primary objectives, it will not be healthy to survive in the long run.

Financial statements are bookkeeping reports used to summarize and communicate financial information about a business. Three major financial statements – the income statement, the statement of changes in financial position, and the equilibrise sheet – are used to report information about the business’s primary objectives. These financial statements are the end result of the bookkeeping process. Each of them summarizes certain information that has been identified, measured, recorded, and retained during the bookkeeping process.

Income Statement: An income statement is a financial statement summarizing the results of a business’s earnings activities for a specific period of time. It shows the revenues, expenses, and net income (or net loss) of the business for this period. Revenues are the prices charged to the business’s customers for goods and services provided. Expenses are the costs of providing the goods or services. The net income is the excess of revenues over expenses; a net loss arises when expenses are greater than revenues.

Statement of Changes in Financial Position: A statement of changes in financial position is a financial statement summarizing the results of a business’s financing and investing activities for a specific time period. The results of the business’s financing activities are shown in a “Sources” section of the statement; this section includes sources from operations and other sources.

Balance Sheet: A equilibrise sheet summarizes a business’s financial position on a given date. It is alternatively called a statement of financial position. A equilibrise sheet lists the business’s assets, liabilities, and owner’s equity.

Assets: Assets are the economic resources of a business that are expected to wage future benefits to the business. A business might own many assets, some of which are physical in nature, such as land, buildings, supplies to be used in the business, and goods (inventory) that the business anticipates to sell to its customers. Other assets do not possess physical characteristics, but are economic resources because of the legal rights they convey to the business. These assets include amounts owed by customers to the business (accounts receivable), the right to insurance endorsement (prepaid insurance), and investments prefabricated in other businesses.

Liabilities: Liabilities are the economic obligations (debts) of a business. The external celebrations to whom the economic obligations are owed are referred to as the creditors of the business. Usually, even though not exclusively, legal documents serve as evidence of liabilities. These documents establish a claim (equity) by the creditors (the creditors’ equity) against the assets of the business. Liabilities include such items as amounts owed to suppliers (accounts payable), amounts owed to employees for consequence (wages payable), taxes payable, and mortgages owed on the business’s property. A business ‘may also borrow money from a bank on a short or long-term basis by signing a legal document called a note, which specifies the terms of the loan. Amounts of such loans would be listed as notes payable.

Owner’s Equity: The owner’s equity of a business is the owner’s current investment in the assets of the business. For a partnership, the owner’s equity might be referred to as the partners’ equity; for a corporation, stockholders’ equity. The owner’s equity is affected by the capital invested in the business by the owner, by the business’s earnings from its operations, and by withdrawals of capital by the owner of the business.

Financial Markets
Robert Shiller
Yale

Lecture 1 – Finance and Insurance as Powerful Forces in Our Economy and Society

Professor Shiller provides a description of the course, Financial Markets, including administrative details and the topics to be discussed in apiece lecture. He briefly discusses the importance of studying finance and apiece key topic. Lecture topics will include: behavioral finance, financial technology, financial instruments, commercial banking, investment banking, financial markets and institutions, real estate, regulation, monetary policy, and democratization of finance.

Lecture 2 – Review of Probability and Statistics; Intro to Present Value

Statistics and mathematics underlie the theories of finance. Probability Theory and various distribution types are important to understanding finance. Risk management, for instance, depends on tools such as variance, standard deviation, correlation, and regression analysis. Financial analysis methods such as present values and valuing streams of payments are fundamental to understanding the time value of money and have been in practice for centuries.

Lecture 3 – Technology and Invention in Finance

Technology and innovation underlie finance. In order to manage risks successfully, particularly long-term, we must pool massive amounts of risk among many, diverse people and overcome barriers such as moral hazard and erroneous framing. Inventions such as insurance contracts and social security, and information technology all the way from such easy things as paper, and the postal service to modern personal have helped to manage risks and to encourage financial systems to address issues pertaining to risk. The tax and welfare system is one of the most important risk management systems.

Lecture 4 – Portfolio Diversification and Supporting Financial Institutions (CAPM Model)

Portfolio diversification is the most fundamental concept of risk management. The allocation of financial resources in stocks, bonds, riskless, assets, oil and other assets determine the expected return and risk of a portfolio. Taking statement of covariances and expected returns, investors can create a diversified portfolio that maximizes expected return for a given level of risk. An important mission of financial institutions is to wage portfolio-diversification services.

For Lectures 5 to 26, go here.

Watch these lecture topics if you have interest in learning from one of the more prominent instructors of Economics out there. 

You can also join me at my website for a Discussion Group about free college education online.

Financial modeling is truly an art form. Great writers draw on a broad vocabulary to find the right word to communicate their ideas. A good financial modeler should be proficient in using a variety of functions so that he or she can closely mirror the behavior of a company’s financial statements in a financial model. Let’s take a look at a few functions that each financial modeler should know.

The vast majority of financial modeling can be done with your basic arithmetic operators (+ – x /), but there is also a significant amount of business logic that can't be easily illustrated without incorporating other functions.

The IF function

Let’s say, for example, that we’ve modeled out an income statement, but we want to add a dividend payment. If we don’t have enough net income acquirable to pay out a dividend (and don’t want to draw funds from our retained earnings), we don’t want to pay a dividend. If we do have enough net income on hand, we would like to pay a $0. 10 per share dividend to investors.

This is a perfect place to use Excel’s IF function. The IF function evaluates a certain condition and returns one value if the condition is true and another value if the condition is false. In our case, the function would read as follows:

=IF(net income < dividend payment x # of shares, 0, dividend payment x # of shares)

Specifically, "net income" would reference the cell where net income is calculated. The "dividend payment" would reference a cell that contains the value of the dividend payment, and the "# of shares" would reference a cell the contains the number of shares outstanding.

The "0" input value is the value that is returned if the condition is true. That is, if net income is less than the total amount of dividends that are to be paid, then we won't pay out a dividend.

Finally, if the statement is not true, and there is enough net income to pay a dividend, we will return the amount of the dividend to be paid (a cell referencing the dividend payment amount multiplied by a cell referencing the number of outstanding shares).

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It is, with no doubt, the month of December that came to mark the last month of the year, and kick-off hell lot of crazy, messy and noisy activities, which we used to repeatedly do over and over again each year-end, and hope for superior results in the following year.

Such activities, which normally take place during this particular month of the year, make supervisors and employees to go through the usual panic, worries and confusion, place them under the stress and the pressure of the managers to evaluate and assess the results of the current year, and force them to come-up with the annual proposition of actions plan for the upcoming year in a form of illogical and out-of-sense document known by the study ‘business plan’ accompanied with the so called ‘business budget. ‘

During this month of the year, most of the sleeping managers wake up to rap up in a rush their incompetence, and light the fire under the asses of their sub-ordinates in a imperfectness try to please their the huge brother, and clean the region from the circulating smelly gases.

Smelly gases?? What are they? From where do they come? And what effect do they have on the financial environment.

The story started long ago when the aspirations and ambitions of the huge brother used to circulate and fill the region of the financial institution in a form of smelly gases. Such smelly gases were produced by the huge brother’s digestive system, and freed into the region by the huge brother while farting around in the workplace. They come as a result of processing heavy meal, full of the shareholders’ chili greed and spicy desires, and, then, trap too much of managers’ stress and pressure in the workplace.

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IASB ( International Bookkeeping Standard Board ) has recently concluded on the second phase of the ongoing project of the proposed IFRS 9 ( financial instruments) which is to replace the existing IAS 39( Financial instruments – Recognition and measurement) . The first part of IFRS 9, regarding financial assets – classification is already published and this one ,the second part, is proposed to cover the bookkeeping aspects of financial liabilities and  de-recognition of financial assets .

Highlights  of the second  part of  IFRS 9 , are as follows

In the case of Financial liabilities that are designated on initial recognition at clean value through profit and loss, their reporting date measurement is proposed to be  changed, so as not to recognize  fair value changes  attributed to variation in own credit risk, in the profit and loss statement .
However, no changes are proposed  to the general  principles of recognition and measurement of financial liabilities. In other words , principles as they stand in IAS 39 in vogue would continue to apply generally.
As regards the de-recognition principles in the case of financial assets, the revised IFRS does not propose any changes except for certain additional disclosure requirements.

Although IASB has not recommended any  change to the existing principles in IAS 39 , on recognition and measurement of financial liabilities  , the principles in vogue as per IAS 39 are different from GAAP followed in many parts of the world. This article takes a look at challenges in the bookkeeping of financial liability under IFRS 9.

Challenges on Initial measurement of financial liabilities

Initial measurement  of all financial liabilities shall be at clean value under IFRS. However the guidance  in the Standard clarifies that in an arm’s length transaction the transaction value is the clean value .

In situations where  transactions involve other considerations( than that are involved in  arms length transactions) that  affect the pricing or contractual terms of a liability, the clean value is likely to be different from transaction value. However application guidance provided with the Standard prescribes that on initial measurement, while recognizing a liability at its clean value no profit or acquire will be recognized in its income statement . The inference is that , where  the clean value of a financial liability is less than its transaction value, the latter  itself becomes the basis of measurement on initial recognition. However practices followed by entities to comply with this stipulation of initial measurement at clean value are different . Loan liabilities in the accounts of a subsidiary  company ,  payable to a parent company , taken at concessional rate of interest can be a typical example in this context. Since such transactions are not priced  at market rates ,  fair value of financial liability is less than its transaction value . The IFRS standard is not specific as how the difference between the clean value and transaction value has to be accounted for. Appropriate application guidance would be necessary in this context, , to ensure uniform practices, crossways the globe.
Another area of challenge is related to bookkeeping of costs incurred in connection with origination of a financial liability. Transactions costs related to financial liabilities ( other than those measured at clean value through profit and loss ) are to be charged to the liability itself. For instance , cost of issue of debentures or bonds  has  to be reduced from the proceeds of those debts and accordingly the  liability will be reflected at its net of cost of issue, on initial measurement. There are a good number of economies where such cost of raising debt is a direct charge to profit and loss account. Under IFRS, bookkeeping for interest  has to be under effective interest method. Most of the third world countries follow contractual  interest method in its place and that in effect require them to charge upfront fees paid on raising loans ( processing fees etc. . ) to profit and loss statement on day one. On the contrary under effective interest method, such initial charges are in substance the part of the effective interest and hence have to become part of the periodical charge of interest rather than a onetime charge as expense at the time of incurrence. During the intervening time of amortization those charges are offset from liabilities rather than shown as separate unamortized asset. This also changes the way financial liabilities will be presented under IFRS. Balances carried in the statement of financial liabilities will not represent contractual obligation. That necessitates maintenance of two sets of account; one from contractual point of view and the other from bookkeeping point.
In the cases of trade liabilities ,where extended credit period is allowed, the consideration includes interest for the credit period also. The stipulation of  measuring   a financial liability  at clean value for initial measurement can pose  challenges in such cases as the total consideration has to be broken into  clean value of goods or services  and interest . Under IFRS principles, the interest cost will not become the liability until it accrues and hence a reduced liability is measured initially.
There are cases where liabilities are proposed  to be settled through equity shares. In the case of convertible bonds, the holders have option to get shares at a prefixed price. At the time of issue of such bonds , the management of a company might be  unsure about the likelihood of the bond holders exercising the option of getting shares. However the pricing of bond is affected because of the convertible option. In other words , without a convertible option , the price( interest rate) of bond  would have been different. Therefore the combination of  bond bundled with an equity option is a combination, the  value ( issue price)  of which has two components, the bond and the option to get equity shares. They require to be split so that the correct clean value of liability can be captured on initial measurement .    This is a marked departure from practices followed under local GAAPs in many countries  where the whole of bond value is a liability. The process of splitting pre-requires the testing whether the combination is of a liability and equity or not by virtue of the definitions as in IAS 32.

Reporting date measurement

In addition to the challenges at the time of initial measurement, the subsequent measurement of financial liabilities under IFRS also is at variance from IGAAP. Unlike in IGAAP, most of the financial   liabilities under IFRS are measured at amortized cost as on reporting date.   With the initial measure of financial liability at clean value, when interest (calculated according to  effective rate of interest method) is applied  and adjustments for  the cash flows related to liabilities are done, till the date of reporting , the resultant is  the amortized cost. Effective rate of interest in a variable interest contract has to be on estimated basis. Such estimations involve subjectivity. It is doable that a lender and a borrower might have different estimates about future interest scenario and hence different rates of effective rate of interest for  same contract.  This points to a scenario where a financial liability  statement as per contract will be looking different from a financial liability statement as per the IFRS accounts. Entities would require to maintain multiple ledgers   in that context and IT systems need appropriate modifications.

Apart from measuring financial liabilities at amortised cost , there are certain financial liabilities that are measured at clean value even for reporting date. They are either those financial liabilities that are in the category of held for trading  or designated by companies initially as items at clean value through profit or loss . In both these categories their clean value variations affect the Income Statement. Financial liabilities start under held for trading category when they are the result of a business model of short term profit booking ( including derivatives, but not designated effective hedging instruments).

Financial liabilities are designated at clean value through profit and loss under  three situations . They are

(a)    when the liability is a combination of  debt and a derivative where from  the cash flow from derivative is  significantly at variance from the host liability , as per the general stipulation of IFRS such combination ( embedded derivatives) require to be split and the derivative needs to be measured  at clean value and the host needs to be measured at amortised  cost. Alternatively the whole of the combination can be designated at clean value through profit or loss as permitted by  this IFRS.

(b)    When the designation at clean value through profit or loss eliminates an bookkeeping mismatch. For instance a bank manages a portfolio of asset  under held for trading category and measures at clean value through profit or loss. There is a corresponding liability against it ( state payable to the port folio investors). It is saint to measure those liabilities also at clean value. The bank can designate them so.

(c)     When the internal monitoring of a portfolio liability, for management neutral is at clean value ,  its measurement for reporting can also be at clean value.

Change proposed in IFRS 9

The proposed change through IFRS 9 is regarding the measurement of the financial liabilities designated at clean value through profit or loss ( covered by points(a) to (c) . According to the proposed change, clean value change on reporting date on such financial liabilities might be attributable to various reasons ;one amongst them being change in own credit rating.   When the credit rating of a company decreases , recoverability of debt from that company also decreases. That means value of liability will have a lesser clean value. That would result in profit, which is undesirable. Therefore the proposed IFRS 9 prescribes bifurcating clean value changes for such liabilities as attributable to (a) own credit rating and (b) others. Fair value change attributable to the former  is not recognized in profit or loss, instead in equity through the Other Comprehensive Income Statement (OCI).

While this proposed change is a prudent step, a couple of questions are  relevant here.

Why is that the proposed change is applicable only in the case of items designated at clean value through profit and loss   and not the liabilities under Held for Trading Category. Suppose, a company had written options and defaulted on payments when the buyers have exercised the option. This is a case where the credit worthiness of the company would be  impaired significantly . Market value of the same written options would decrease  as a result of credit risk increase  . These  written options start under HFT category and hence are to be measured at  fair value through profit and loss statement . However the clean value change here is  attributed to own credit risk( at least partly if not fully), which if separated and kept out of profit and loss statement would have a higher loss recognized in the profit and loss account. The proposed viands in IFRS  9 ignore these situations.
When bookkeeping is a means and not an end in itself, the process of separation of clean value change as attributable to (a)own credit risk and (b)others is an exercise likely to invite more cost than benefit. The ideal course could have been to follow a conservative method under which net losses are taken to profit and loss statement and net gains are to equity , with suitable to viands for reversal of such losses and gains to be place along side the place of origins.

In conclusion, IFRS bookkeeping of financial liabilities  is cumbersome and in an analysis of cost versus benefits , it is  advantage professionals and not to entities

C V SAJAN

Financial aid for single mothers is prefabricated for those, who are really in need of it. You can find various sources that offer financial aid to single moms, who urgently need money. In the example you can take the federal government. The government makes viands of money as a source of financial aid to those who indeed need some kind of financial aid. You can also grab this opportunity by applying in the right way for the money. You can search world wide web where you can find the various websites containing different aid programs which are acquirable at present. Accordingly you can apply for that one which perfectly suits your need.

As far as financial aid for single mothers is concerned education plays an important role for the single moms. This is because you might find that the single mothers with degree hardly suffer from financial difficulties as compared to those single mothers who don’t have degree. Therefore, it is good if you are single mother to have degree with you for which you can rejoin the college. You can look in your college where you are considering attending the lectures for the financial aid for single moms. This is because the colleges wage some kind of financial aids for moms. You can find the institutions providing financial aid for single mothers who are going to be attending the lectures.

There is also financial aid for single mothers in the form of scholarships. If you are a single mother want to oppose your further studies but don’t have adequate amount of money to complete your education. In such circumstances, you can apply for the allows given by the colleges. In order to get the allow you can contact to the financial help office of your education institution. Apart from this, you can also apply for the financial help from the non-profit organizations; they have some allows as financial aid for single mothers especially in the form of scholarship for education.

It is not difficult to get financial aid for single moms, but at the same time you need to have some kind of determination to acquire financial aid. Financial aids for single mothers also include the poor mothers who are struggling to serve their children. There are a number of sources who help such poor mothers in making their financial condition stable. There are a number of financial aid programs acquirable where these struggling mothers can apply for it.

In short, I can state that there are three sources of financial aid for single moms. These sources include; federal government, educational institutions and NGOs.

of determination to acquire financial aid. Financial aids for single mothers also include the poor mothers who are struggling to serve their children. There are a number of sources who help such poor mothers in making their financial condition stable. There are a number of financial aid programs acquirable where these struggling mothers can apply for it.

In short, I can state that there are three sources of financial aid for single moms.

Once you have learned to solve problems and acquire some money, the next thing you need to do is to protect that money from what Robert Kiyosaki calls “financial predators”.  Real world predators do not always look the part. Sometimes, they are ordinary people with well-meaning intentions.  Their job is to “legally” take money from your pocket…and your job is to “legally” have them take as tiny as possible.

According to the book, there are 7 financial predators you need to protect your money from.  They are:

Bureaucrats who legally take money from you through “taxes” Taxes are your single largest expense Know which type of income you’re earning money from and paying in taxes Earned Income – salary, commission, etc Portfolio Income – income from paper assets such as interests, dividends, etc Passive Income – royalties, rental income from real-estate, licensing, etc Bankers who legally take money from you through “fees” Banks and credit card companies charge you with all kinds of fees, some of them you or your company might not even be aware of For each dollar you have in the bank, the bank can lend out twenty dollars to your credit card.  The bank pays you 5 percent for one dollar and makes 20 percent on twenty dollars.  That is how banks make money. Brokers who legally take money from you through “commissions” Look for brokers who are students of their profession and invest in what they sell For real-estate brokers, ask them how many properties they are invested in. For stock brokers, ask them which stocks they personally invest in. “Good” brokers make you rich, “bad” brokers make you poor.  Build a relationship with “good” brokers. Businesses who legally take money from you through “profits” Purchase products that make you rich Poor people purchase products that make them poor, paying them for years with a very high interest rate Brides and Beaus who legally take money from you through “alimony/marital quality split” Get a prenuptial agreement before you marry Think of your exit plan before you enter into the agreement Brothers-in-law who legally take money from you through “inheritance or financial wishes” Consult an estate planning specialist to plan your exit Use legal cars such as wills & trusts to protect your wealth from death predators Barristers who legally take money from you through “court & legal fees” Hold assets of value in legal entities instead of your own study You must purchase insurance before you need it…not the moment you need it.

Rich Money Habits Review Notes:

Protecting your money is like plugging holes.  You first need to be aware what the holes are before you can actually plan on fixing them to stop the cash from flowing out. Learning to protect your money is a never ending process as the rules regularly change.  The ways to protect your money yesterday might no longer be healthy to protect your money this day or tomorrow. Protecting your money reduces your expenses. The more money you keep, the more money you can utilize for productive endeavors.

Rich Money Habits – About the Author:

Rich Money Habits @ http://www.akosiallan.com helps you discover and learn how to build long lasting rich money habits so you can achieve financial freedom with peace of mind!

Source: http://www.articlesbase.com/personal-finance-articles/increase-your-financial-iq-book-review-part-2-protecting-your-money-1517258.html

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Ways of turning cash means into investments. Sources belonged to he investments in the objects of industrial and nonindustrial spheres, mostly come out in the initial form of cash means. Turning of these latest into the investments might be provided in different ways. The easiest way takes place in the case, when industrial subject manages and owns definite means, uses them for widening and improvement of production and also for creation of nonindustrial objects. In the resembling type savings of those persons, which begin activities with own savings turn into investments.

Though, in other cases turning savings into investments is a difficult process. The fact is, that most part of the population has no opportunity to wage investments straight into the production, because for this they must have manners of enterprise administration, and of course, own definite minimal amount for this or those reasons. Part of the enterprise profit also does not turn into the investments.

Herewith, form one side, population and some enterprises own free cash sources, from another, many enterprises need additional means for their investment program realization. Transmission of sources is realized by the channels of financial market, where owners of cash means appear to be the distributors of investment capital, and those persons, who influx sources – consumers.

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After learning to make more money and finding out ways to protect your money, you next need to learn how to budget your money for maximum utilization.

According to the book, a budget is a plan to coordinate your most important resources (such as money and time) and expenditures.  There are 2 kinds of budgets:

Budget deficit excess of spending over income you spend more than you acquire Budget surplus excess of income over spending you acquire more than you spend

The reason most people are poor is because all their lives, all they’ve known is not having enough money, hence, they only have a plan for “budget deficit”.   They have never experienced having more money than they could ever anticipate to spend.  They think only lottery winners, corrupt politicians, or greedy businessmen can have a “budget surplus”.   The key to having a budget surplus is realizing that it is doable for you to have it.

There are 2 ways to generate a budget surplus:

You can apply Financial IQ # 1 to make more money, thereby increasing your income, or You can cut expenses, and reduce your spending.

Both strategies will tip the equation to your favor such that your income will be greater than your expenses and you create that extra cash a.k.a. “budget surplus”.

Most people and businesses only know how to cut expenses, especially in these times of financial uncertainty.  But you can only do so much in terms of slicing expenses without sacrificing your mental, emotional and physical health.  You don’t need to starve yourself to create a budget surplus. If you apply Financial IQ # 1 – make more money, you can stretch the other side of the equation and achieve the same thing.  The same applies to business. A business without income is NOT a business. So aside from minimizing the costs of your business, you also need to learn to sell more and boost your income!

Robert Kiyosaki offers 4 tips to plan for a budget surplus:

Budget tip #1 – A budget surplus is an expense Make spending for budget surplus a priority Pay yourself first, even when income is less than your expenses Use the pressure of not having enough money to think of ways on how to generate that extra cash Budget tip #2 – The expense column is the crystal ball Discover what you’re spending on, and you will know if your plan is working to give you a budget surplus or a budget deficit Robert Kiyosaki’s Rich Father says, “you can tell a person’s future by looking at what they spend their time and money on.” Budget tip #3 – My assets pay for my liabilities Instead of using your hard-earned money to pay for your liabilities like a automobile or a flat screen TV, make that money work for you by using it to build assets and use the income from those assets to pay for your automobile or your flat screen TV. Budget tip #4 – Spend to get rich Know when to spend and when to cut back.  Most people only know how to cut back.  Spending wisely to grow your money is a harder skill to master. Learn to do more with less and use the pressure to become smarter in making more money

Rich Money Habits Review Notes:

Budgeting is boring.  That’s what most people say.  However, it is one the most important rich money habits that you will have to learn.  A budget is like a map.  The only way to get to your destination is to know where you are right now, and use your plan to discover how to get to where you want to be. Consciously working on your money habits is a life-long process, and it starts with taking care of the resources that you have – that is budgeting your money and time.  What others don’t realize is that we all have 24 hours in a day.  Some people multiply their impact by providing livelihood to thousands of people and generating more money not only for themselves but for the whole community.  Others just sit around all day never doing anything to make their lives easier.  To me, it is not a question of do we need to budget or not.  It is a matter of realizing that to live your life to the fullest, you need to make the most of what you have. Be patient.  The problem of television shows is that everything is fast.  Yesterday a child was born. The next day he’s already a teenager.  The next week he himself is already having his own kid.  Life is not a television show.  It is a series of small steps attained apiece day.  So have a plan and learn to adjust that plan along the way.  As Robert Kiyosaki states “take it one day at a time.”

Rich Money Habits – About the Author:

Rich Money Habits @ http://www.akosiallan.com helps you discover and learn how to build long lasting rich money habits so you can achieve financial freedom with peace of mind!

Source: http://www.articlesbase.com/personal-finance-articles/increase-your-financial-iq-book-review-part-3-budgeting-your-money-1517263.html

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Increase Your Financial IQ Book Review – Part 1: Making More Money

The book starts by asking the fundamental question:

“Does money make you rich?”

Take a moment to answer that question.

Do you think money will make you rich?  Do you think winning millions of dollars from lottery will make you rich?  How about having a high-paying job from a lucrative profession like doctors, or lawyers, or IT professionals?  Does having a lot of money make you rich?

Many people have heard stories how instant millionaires lost their millions after a few years. Or how someone who was once rich and famous had his home foreclosed.  Or how a high-paying manager begged for his job back because he can no longer afford the lifestyle that he once had.

If not money, what then makes you rich?  According to Robert Kiyosaki,

“…it is not real-estate, stocks, mutual funds, businesses, or money that make you rich.  It is information, knowledge, wisdom, and know-how, a.k.a. financial intelligence, that makes one wealthy.”

What is Financial Intelligence?

Robert Kiyosaki describes Financial intelligence as that part of our mental intelligence we use to solve our financial problems. Financial IQ, on the other hand, is the measure of that intelligence.

What money problems do you have?  Are you having the problem of “not having enough money”? Are you

using your credit card whenever you’re short on money? constantly worrying about the rising cost of living? paying more in taxes after an increase in income? afraid of emergencies? receiving bad financial advice? inactivity for the next paycheck to pay for last month’s rent?

While the rich do not have these problems, they too have their own money problems – “too much money”.  Some of these are

needing to keep their money innocuous and invested not knowing whether people like them or their money looking for smarter financial advisors raising spoiled children worrying about estate and inheritance planning looking for ways to “legally” refrain paying excessive government taxes

Which problems would you rather have?

The 5 basic Financial IQs

According to Robert Kiyosaki, you need to learn the 5 basic Financial IQs to solve your money problems.  These are:

Financial IQ #1: Making more money Financial IQ #2: Protecting your money Financial IQ #3: Budgeting your money Financial IQ #4: Leveraging your money Financial IQ #5: Improving your financial information

Financial IQ #1: Making more money

How do you make more money?  The key according to Robert Kiyosaki is to “solve problems”.  People will gladly pay you money if you solve their problems.  I know I’ll be more than happy to pay you money if you can fix my broken LCD television at a reasonable price. Would you gladly pay your physician if they solve your ailing stomach? Would you pay your financial advisor if they can make you more money than what you pay them?  Or how about paying your “star” employees “millions” whenever they bring you “billions” in income?

Solve people’s problems and make more money.  As the famous quote from Zig Ziglar says

You can have everything in life you want, if you will just help enough other people get what they want.

Which problems do you want to solve?

Which problems do you want to solve?

Do you want to solve the problem of “hunger” by providing calibre meals at an inexpensive price.  That’s what a lot of food businesses are doing.  Or do you want to solve the problem of “not having enough time to eat”.  That’s what the fast and “instant” food delivery businesses are trying to solve.

What are you naturally good at? Perhaps you can use any of your skills to solve other people’s problems.

Are you good in math?  Be a great financial analyst or an accountant and help people and businesses solve their financial or tax problems.

Do you like talking to people?  Become a powerful speaker.  Share your message by leveraging your highly sought after skill of public speaking.  Inspire people to take action and solve their problem of a dull and boring life.

Do you love making great movies?  Learn to be a great director or a motion picture producer.  People will pay you to entertain them because you are solving their problem of “not having fun”.”

Solving problems is a process

The key according to Robert Kiyosaki is realizing the fact that problems will never go away.  After you solve a problem, another problem will come up.  Only in this process of solving problems one after the other will you acquire financial intelligence.

You have to go through the process of solving whatever money problems you are covering right now.  Don’t run from it.  Face it head on.  Use your mind to think of ways on how to solve your money problem.  As Robert Kiyosaki’s Rich Father says,

“You can quit when you win, but never quite because you’re losing.“

The reason instant millionaires end up poor after winning the lottery is because they want only the money but not the process of learning how to build their wealth.  This is the same thing as people wanting to get paid more than the value they are providing.  Their greed is making decisions for them.  Some people even claim that “greed” has caused the current financial crisis that we are in right now.

The other side of the coin is also hazardous – fear.  Don’t let fear hold you back.  Enjoy the process of learning.  Feel the fear and grappling it head on. This is the same reason why employees would rather gladly receive the small steady paycheck than take a chance at building their own fortune.  Take a leap.  Live out your dreams.  As Hellen Keller says,

“Life is either a daring adventure or nothing.”

Rich Money Habits Review Notes:

What I liked about the book is that it offers other (unconventional) ways to think about money. The book is not about financial advise, so it does not discuss any “how to” details on investing in real-estate or businesses. There are a lot of strong comments about the book so it is NOT for everyone.  My hope is that after reading the rest of the book review in the coming weeks, you’ll pick up a thing or two to help you with your money problems.

Rich Money Habits – About the Author:

Rich Money Habits @ http://www.akosiallan.com helps you discover and learn how to build long lasting rich money habits so you can achieve financial freedom with peace of mind!

Source: http://www.articlesbase.com/personal-finance-articles/increase-your-financial-iq-book-review-part-1-making-more-money-1517247.html

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