What is Financial Intelligence?

Do you ever wonder what’s the cause of the break up of marriages? It’s usually the subject of money. What if the breadwinner gets downsized? What if he lost his job?

Schools usually teach Scholastic Aptitude Test (SAT). You want to know how good you are in reading, writing and arithmetic.  These are very important skills. And depending on how well do you perform in SAT, the  next thing schools focus on is the Professional Aptitude Tests (PAT) to know whether you’ll become a doctor, a lawyer, a fireman, or whatever you want to be.

But what schools fail to train people on is the thing called Financial Intelligence. Rarely did the subject of money is discussed in schools. So what is Financial Intelligence?

If I give a sum of money, say $10,000 to a group of people, then 80% of them might have nothing left at the end of the year. 60% of them would have earned $10,100 at the end of the year since they could have deposited it in banks to earn interest income. And 4% would have anywhere from $20,000 to $1,000,000 or more at the end of the year because they are financially intelligent.

There are two things that one should learn in his desire to increase his financial intelligence. The income statement which involves the income and expenses and the balance sheet which involves assets and liabilities. These are the very basic information that one should know to increase his financial intelligence.

What’s the difference between an asset and a liability? Robert Kiyosaki always tell that assets are something that puts money in a person’s pocket while liabilities are anything that puts money out of a person’s pocket. With that said, there is always the issue of the house being an asset or a liability.

Kiyosaki further said that “If I stopped working, the ASSETS will FEED ME while LIABILITIES will EAT ME.”

Another important lesson in increasing one’s financial intelligence is the subject called CASHFLOW. There is a huge difference between the cashflow of a poor person, middle class person and rich person.

For the poor people, Kiyosaki said that all they have is a job. Then income comes in from the job. It goes down to expenses right away to pay their rent, clothing, food and other expenses and ultimately goes out of their pockets. The illustration below points it out:

For the classic middle class person, Kiyosaki said that it’s a little bit more different. Income also comes from their jobs. Then as the income rises, they will now buy liabilities they think are assets. These are cars, luxury vacations, gadgets,  etc. Little do they know that these are actually liabilities that depletes their money. Eventually, it will go to expenses and then finally out of their pockets. The illustration below points it out:

For the rich person, Kiyosaki said that income of the rich comes from their assets. They don’t have a “job” like what middle class and poor people usually have. They have business and other income generating assets like stocks, bonds, mutual funds, etc. They know the difference between assets and liabilities and they buy assets that will provide passive income. While the poor and middle class persons are focusing on income, the rich person is focusing on the assets. And the assets are the great secret of the rich. The illustration below points it out:



Everytime you have income from your job, then the choice is yours. It will now depend to you what do you want to be. Is it the poor, the middle class or the rich person mentioned above? If every income goes outright to expenses, then you chose to be poor person. If every income goes out to liabilities to buy a bigger house, a new car, or you always take a vacation on your credit card, then what you chose is a middle class person. And if every income, you chose it to go to the assets, then you make that decision to be a rich person.

As Kiyosaki says:

All of us are giving two great gifts. Our mind and our time. It’s up to us to do what you please with both. With each dollar bill that enters your hand, you and only you have the power to determine your destiny. Spend it foolishly, you choose to be poor. Spend it in liabilities, you join the middle class. Invest it in your mind and learn to acquire assets and you will be choosing wealth as your goal and your future. The choice is your and only yours. Everyday with every dollar, you decide to be rich, poor, or middle class.”


Kiyosaki said that if we want to be financially intelligent, we should mind our own businesses! How is that? The poor people being a professional employee are not minding their own business because they mind the business of the shareholders of the company. They are working in a company to boost the income and revenue of that firm. They are minding what their boss tells them to do. Not only that, they also mind the business of the government when it comes to tax payments.

The middle class person being a professional employee too, aside from minding the business like what the poor people does, also minds the business of banks as they have house and car mortgage payments. They worry as to where to get the funds to pay their mortgages.

For the rich people, they mind their own business. They trade their own stocks, buy their own properties and primarily make their own decisions to invest.

Kiyosaki said that most people are in the poor and middle class because they mind other people’s business. They believe in hardwork but without being financially literate. They buy more liabilities that are camouflaged as assets because they mind what other people tells them.

So if their income increases because of hard work, their expenses increases too from their tax expenses notwithstanding the increase of liabilities. Suddenly, they lost their jobs! Boom! What happens next? They lose their income. But will the expenses and liabilities lose too? Definitely NOT! And this causes financial insecurity or financial struggle on their end.

The answer as Kiyosaki said lies on focusing on your own business and instead have your own money work for you so that even if you lost your job, then there will be assets that will continue to feed you. We could not ascertain the lives of companies. They may be there for 5, 10 or even 20 years but few can survive 50 years or more especially nowadays that a lot of companies declare bankruptcies as the global recession continues.


Kiyosaki said that there is a huge difference between how the income of both the poor and middle class persons are taxed as against the income of the rich person. The poor people earns income from their jobs and gets taxed right away before they can spend what remained. The rich people earns income from their jobs and assets, they spend some of it by buying more assets and then they get taxed as they cashed in these assets.

Finally, Kiyosaki devised a game simulating the real world of business and investing called the cashflow game which I already played several times. One of the foundations of learning is repetition. The more you play the cashflow game, the higher the possiblity of increasing your financial intelligence and the richer you would become.

So are you financially intelligent?

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