Financial education is the most important topic which is being ignored in the schools/colleges. There are many instances where a financial education might have saved you from losing more money.
I have seen many people sacrificing their own life’s when they fail to maintain the cash flow and balancing the cash flow plays an important role in the financial education because money has to be with the company/ person when they need it and not always we do things when we have money.
Financial Education Terms
Below are the few critical terms which we need to understand as part of financial knowledge.
3. Cash flow
All of these must be familiar to most of the people but very few people know the exact meaning. It’s very often people confuse between an asset and a liability. So, in this post, I will have a walk through with all my readers on the financial education basics.
Any money taking property is a liability and the money coming out your pocket makes it a liability. Many people assume your own house as an asset whereas its a liability because it takes money out of your pocket. The rented house comes under asset as it adds income to your pocket once you are done with construction and basic arrangements.
Any property adding money to your pocket is an asset. It might be bonds, stocks, rented apartments or rented land. An asset is the one which adds monthly or quarterly income to your pocket. The more assets you have the more income you will generate.
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Your net value is always calculated based on your assets minus liabilities. Every successful person will have both assets and liabilities where assets outweigh liabilities. Every person needs to maintain more assets to live a luxurious life.
Cash flow –
A person becomes successful when he/she can manage the cash flow. Many people fail at managing the cash flow which makes them a failure in the business model. Many famous business persons have failed in maintaining the cash flow and stepped down from their respective positions. You need to understand how to control cash flow when there is excess cash with you and how to manage when there is less cash with you.
All of us know the profit definition exactly because it’s the only financial term taught from our childhood. Profit is the amount calculated after taking the expenses and taxes from your net income. Profits make every business or person successful and we have to make sure whatever product or business you choose it must land you in profits zone.
Income is the amount of cash getting into your pocket irrespective of the expenses. If you are generating 100K per month from all your revenue-generating sources then your income will be stated as 100K per month whereas your expenses come into the picture while calculating profits.
The income which you get from stocks, bonds, betting sites like Tonybet or jobs adds up to your net income.
Financial education is the most important knowledge every adult needs to have and without this, there won’t be any control on your cash flow and your income will remain at the same level forever.
We would like to help you in making more profits in your career. Do concentrate more on generating income from multiple sources as your expenses completely depend on your choices but never risk your primary income source for adding new income source. Warren Buffet has advised everyone to maintain multiple income sources so that every day you won’t have a fear of losing one source of income.