Have you ever heard that you go to the bank to take a loan and the bank manager tells you to bring your degree and we will give you a loan. You will say what are you talking about? Do you get a loan on the basis of degree? But then why is our society so crazy about degrees? If you see around you, people are only after the degree papers. If we get a degree, then we will be successful in life. But actually, when you need money for your house, car, business, to expand it. Why do you need money? We will talk about it. Then you will not get any loan on your degree. You will see that those people who are less educated than you, they get more loans and earn more money. Why does this happen? Because we are always shown the value of the degree. But we are never shown the value of building a financial statement.
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| Improve Financial iq |
You are understanding that there is a business in which we can get a 30% profit per year. But if you have 1 crore rupees, then you will have a profit of 30 lakhs. But if you have 10 crore rupees, the profit percentage will be the same. But you will have a profit of 3 crores. Even if this money comes on loan, there is some interest in it. They will also give. Even then we will save many crores. So now let's understand that if you ever need leverage in life, then how will you get it?
Today we are talking about increasing your financial IQ. Now there are a lot of intelligent people. Warren Buffett says that if your IQ score is very good, then donate a little. Because if you are thinking of making money from the stock market, then you do not need an extraordinary IQ. Similarly, when we talk about financial IQ, then there is nothing extraordinary. There are basic things that you need to understand. Now let's talk about the financial statement. And then we will talk about how you are going to increase your financial IQ. So now when we are talking about the financial statement.
There are four things. One is your income that you are earning. Second is your assets. Third is your expenses. And the fourth is your liabilities. Now let me explain a simple thing to you. When we subtract the expense from the income, then our profit comes here. On which you get tax. And if you subtract the liability from the asset, then the net worth of a person comes from here. How much is your worth? We say that it has a net worth of 100 crores. Because he will have assets of 100 crores and equal liabilities. So this is how his net worth came out. If a person is making very good profits, that is also a very good thing. But these four things can take you very high in life if you start understanding them. People do not pay attention to these things. We are living a life of negligence. Do you understand negligence? Whatever is going on is fine, whatever is happening is fine.
Now if you need to understand these four things, Let's understand. So assets are those things that bring money in your pocket. Liability is that thing that takes money from your pocket. Such things that bring money in our pocket. And we have to reduce such things that take money from our pocket. We have to increase our income and reduce our expense. This is a very simple thing. It is so simple, but still if I talk about this financial IQ, In developed countries, people who know these four things in detail, Four out of ten people know, six people do not know. Developing countries like India, Eight out of ten people in India do not know these four things. But if you ask a person around you, what is net worth? What are assets? What are liabilities? So they are living in negligence. They do not know in detail. If you do not know the name, the concept, then ask the concept.
Now the thing is that how are you going to increase your income? How are you going to increase your assets? It will not happen in a day. But the focus should be here. That my assets should be built. Multiple source of income should be built. Now to increase your financial IQ, you have to work on three things first.
One thing you have to do budgeting. It is not that you went shopping and bought a shoe for 10,000 rupees. It is possible that the person is earning 25,000 rupees or 30,000 rupees. Today you have money. You added four months of salary. You have one lakh rupees in the account. One lakh rupees is added, but can you buy a shoe for 10,000 rupees? If you have one lakh rupees on it, then he can buy it. Spending ten thousand rupees is a big deal. Here you have to understand a rule. Budgeting has a simple rule. We are talking about increasing financial IQ. You also have to increase your IQ. You have to understand the rule. 50-30-20 rule. We have already created a post regarding the 50-30-20 Rule. Please take a look at that post first.
What is the 50-30-20 Rules in Finance.
If a person is earning 25,000 or 50,000 rupees. How to spend it? You can do it according to this rule. But this rule is valid only until a person's salary or income is less than 4 lakh rupees. Things change above 4 lakh rupees. We have heard that inflation is eating money. Then the second thing comes, investing. Now investing, whether you diversify it or you concentrate it completely, it is your choice. If you want to start with a small amount of money, start with ETF investing. More money is added to you. You can invest in real estate. But invest. Those who invest, they become rich and that is the full stop. There is nothing beyond that. You have to become an investor. When you get more money, then start investing in real estate.
Finally, the Third thing, which is very important, which people ignore and that is debt management. See, a loan is not wrong. If you are borrowing an iPhone, then it is wrong in my opinion. But if you take a home loan, you have made your home with it. It is not necessary, you will have to understand, but according to me it will not be wrong. If you take a loan to increase your business, then it is not wrong. Your direction is right. You are thinking right. And it is very important to manage debt, but most of the people in India are taking personal loans. Why do people take personal loans? To renovate the house. Marriage comes in the house for that. Emergency comes for that. They don't get insurance. There is an emergency. There is no health insurance. Emergency comes. That's why people take personal loans.
This debt management is very important. And if you manage the debt properly, you take a loan. If you repay the loan properly, then your cibil score also improves. So your banker knows that his cibil is fine. So next time you have more chances of getting a loan. But the person who does not have a cibil form, his cibil is bad. Means he took a loan and could not pay the money. Then your cibil will go bad. You will not get a loan. Now the point here is that the financial statement that I talked about, the four major things in it are a track record of your regular income. What is important? It is not a matter of earning once a year. Whatever you are earning, your banker will see if you are earning consistently or not. Whatever you are earning, if your salary comes, it will not come to us. You earn money, you earn profit. It depends on your business to business. But he will see that every year, your profits are increasing and increasing. How are the profits going on? Are the sales going on properly or not?
These are some things that you need to understand. You have to build them. You have to pay attention to them that I do not care about degrees. My financial statement should be solid. Someone will see and say that this man is solid. The second thing is my expenses, which are in the books. Expenses are not wrong. Your business expenses can be. So the expenses that are increasing, in which direction are they looking? If your expenses are looking to expand your business, then it is very good. Similarly, assets, are your assets building from time to time or are the assets decreasing? So it will be seen in your financial statement. If you have a house, if you have a real estate, then you will put it in the assets. Your machinery will go into the assets. So what are the things you have that are your assets? And then the assets should be such that you are producing income.
If a person is earning 25,000 or 50,000 rupees. How to spend it? You can do it according to this rule. But this rule is valid only until a person's salary or income is less than 4 lakh rupees. Things change above 4 lakh rupees. We have heard that inflation is eating money. Then the second thing comes, investing. Now investing, whether you diversify it or you concentrate it completely, it is your choice. If you want to start with a small amount of money, start with ETF investing. More money is added to you. You can invest in real estate. But invest. Those who invest, they become rich and that is the full stop. There is nothing beyond that. You have to become an investor. When you get more money, then start investing in real estate.
Finally, the Third thing, which is very important, which people ignore and that is debt management. See, a loan is not wrong. If you are borrowing an iPhone, then it is wrong in my opinion. But if you take a home loan, you have made your home with it. It is not necessary, you will have to understand, but according to me it will not be wrong. If you take a loan to increase your business, then it is not wrong. Your direction is right. You are thinking right. And it is very important to manage debt, but most of the people in India are taking personal loans. Why do people take personal loans? To renovate the house. Marriage comes in the house for that. Emergency comes for that. They don't get insurance. There is an emergency. There is no health insurance. Emergency comes. That's why people take personal loans.
This debt management is very important. And if you manage the debt properly, you take a loan. If you repay the loan properly, then your cibil score also improves. So your banker knows that his cibil is fine. So next time you have more chances of getting a loan. But the person who does not have a cibil form, his cibil is bad. Means he took a loan and could not pay the money. Then your cibil will go bad. You will not get a loan. Now the point here is that the financial statement that I talked about, the four major things in it are a track record of your regular income. What is important? It is not a matter of earning once a year. Whatever you are earning, your banker will see if you are earning consistently or not. Whatever you are earning, if your salary comes, it will not come to us. You earn money, you earn profit. It depends on your business to business. But he will see that every year, your profits are increasing and increasing. How are the profits going on? Are the sales going on properly or not?
These are some things that you need to understand. You have to build them. You have to pay attention to them that I do not care about degrees. My financial statement should be solid. Someone will see and say that this man is solid. The second thing is my expenses, which are in the books. Expenses are not wrong. Your business expenses can be. So the expenses that are increasing, in which direction are they looking? If your expenses are looking to expand your business, then it is very good. Similarly, assets, are your assets building from time to time or are the assets decreasing? So it will be seen in your financial statement. If you have a house, if you have a real estate, then you will put it in the assets. Your machinery will go into the assets. So what are the things you have that are your assets? And then the assets should be such that you are producing income.
Also Read, How to Manage Money? 5 Steps Simple Financial Plan
Robert Kiyosaki says that it is a liability. You take money from your pocket, but the point is this that make solid assets in life and finally liabilities. This is important that who is to give me? Someone has a loan on me, he will go into liability. So liabilities should be less. We understand this, but are there any such liabilities? Those important lessons with which you can increase your financial IQ. And like most people do not pay attention to these aspects, you will definitely pay attention. I personally think so. If you have any questions, you can definitely ask in the comments. In fact, if you have your own thoughts, your financial IQ, how can people increase their financial IQ, tell us in the comments.
Robert Kiyosaki says that it is a liability. You take money from your pocket, but the point is this that make solid assets in life and finally liabilities. This is important that who is to give me? Someone has a loan on me, he will go into liability. So liabilities should be less. We understand this, but are there any such liabilities? Those important lessons with which you can increase your financial IQ. And like most people do not pay attention to these aspects, you will definitely pay attention. I personally think so. If you have any questions, you can definitely ask in the comments. In fact, if you have your own thoughts, your financial IQ, how can people increase their financial IQ, tell us in the comments.
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