1. What are assets and liabilities? Many people can't figure out the connection between income statement and balance sheet, but this connection is very important to understand them. The fundamental reason why many people are in financial difficulties for a long time is that they never understand the difference between assets and liabilities, and the reason for misunderstanding is the words used to define them. Rich dad told us: assets are things that can put money in your pocket. Debt is something that takes money out of your pocket. If you want to get rich, just keep buying assets all your life; If you want to be poor, you just have to keep buying people into debt. It is precisely because we don't know the difference between assets and liabilities that people often buy liabilities as assets, which causes most people in the world to struggle with financial problems. ? Examples of assets: 1. businesses that can operate normally without my presence; 2. stocks, funds and bonds; 4. real estate that generates income; 5. patents and copyrights; and 5. anything that is valuable, can generate income or increase value and has a good circulation market? Examples of liabilities: 1. Maintaining survival: food, clothing, housing, transportation; 2. Ability cultivation: education, study, functions; 3. Leisure and entertainment: travel, meals, activities; 4. Laws and regulations: taxes, fees; 5. Extra expenses: fines, socializing, supplements; 6. Capital lending: loans, credit cards, private loans; 2. In financial reports, reading numbers is to find out the situation and understand the flow direction, that is, where the money is flowing. In 8% families, the financial statements show a picture of working hard ahead of schedule: both the rich and the poor need to work hard in the early days, but the rich buy assets instead of liabilities, so that they can realize wealth freedom later; The poor are not because they don't earn money, but because they buy liabilities instead of assets. We can explain the cash flow of the poor, the middle class and the rich through the balance sheet. Interpretation of the balance sheet of the poor: the income source of the poor is generally wage income (working hours in exchange for salary). Because the income of the poor is not enough or barely enough to spend, his cash flow chart shows that his income is completely used for spending. Therefore, it is generally manifested that the poor refuse to have extra money to buy assets and liabilities, and there will be no later non-wage income, so their balance sheet is very simple, and it is difficult for the poor to change the status quo, and it is even more difficult to realize wealth freedom (non-wage income & Expenditure).

Interpretation of the balance sheet of the middle class: The problems of the middle class (for example, in society, senior white-collar workers, senior engineers, enterprise executives and small business owners all belong to this class) are particularly obvious in this picture. Why do these people with enviable jobs often suffer more financial troubles than the poor? Because they didn't distinguish between assets and liabilities. The middle class has a higher income, so its purchasing power is much higher than that of the poor. Although the middle class has a good vocational education foundation, the general financial education foundation is very low. Simply put, it is a "doctoral student" who works to make money and a "primary school student" who invests in wealth management. Because of their lack of financial education, they often invest their salary savings in liabilities that seem to be assets (such as buying private cars and mortgage loans). The most obvious problem brought by this kind of investment is the waste of funds, which makes these people have no money to invest in real assets. But the most obvious problem is not the most fatal. Another hidden big problem is that the "liabilities that look like assets" they buy will subtly help them spend a lot of money, but they take it for granted. Interpretation of the balance sheet of the rich: The reason why the rich can finally achieve wealth freedom through their efforts to accumulate wealth is not only that they are born with the ability to earn money, but more importantly, they have the talent of financial management: they understand the importance of cash flow, know how to gradually turn income into assets with cash flow value, and understand the importance of non-wage income cash flow brought by assets. Therefore, the rich buy assets with potential cash flow value before becoming rich. Such as stocks, bonds, real estate, etc., in order to obtain the cash flow of non-wage income, while reducing the expenditure of liabilities or avoiding the purchase of liabilities, so as to achieve wealth freedom (income >; Expenditure). The rich-balance sheet