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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Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

22 responses on “What is Financial Intelligence?

  1. Financial intelligence is like all about the budget. A person who budget better will have more money in the future.

    nice read! ^_^

  2. Hello again! Thanks for the immediate response. I already added you at my blogroll and I have also subscribe through your feeds via email. I hope you can add mine too! Thank you very much. 😀

  3. hi tyrone! like i promised, i am here! 🙂 woohoo hehe

    financial intelligence is having that ability to survive and thrive in the economic world with a set of skills that kiyosaki mentioned: marketing, accounting and business law. as i try to look at it, it’s not like shrewd investors have studied these subjects in prominent schools, rather they learn it from the street and by experience. i know a capitalist in our area who has a knack for marketing–feeling the trend of what people like, and he seems to do it instinctively. of course, he knows basic accounting but he leaves the more sophisticated stuff to his accountants, and he has his lawyer as well. it’s the ability to spot a market trend, then act on the opportunity by convincing other people to jump and provide you money so that the investment will come into fruition, is financial intelligence at its simplest description. one does not need to have the money, but needs to spot the opportunity; and sell the opportunity to other people who have the money 😉

  4. hi! thanks for visiting my blog. kinoconsider na rin kita para sa nominees ko sa inluential blogger. goodluck! dadalasan ko na din pagbisita sa blog mo kasi bobo talga sa topic na ganito!hehe

  5. What is Financial Intelligence? | Millionaire ACTS…

    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…

  6. I actually played the Cashflow game before, and I would want to play it again, kasi parang nalimutan ko na ung set up nun. I like your site. I need all these intellectual things to learn talaga hehe

    • hi, cashflow is good help in our finances with this book we know how to used our extramoney we have.sguro kung lahat ng tao ng pinas ganito ang thinking o practice sguro hindi ma syado mag hihirap ang pinas.inggat.

  7. i am on my way to financial freedom because i do the things that robert kiyosaki advised. i would say it takes a lot of patience, right attitude and financial intelligence towards financial freedom. i know i can!!!!!!!!!!

  8. Nice post. Kiyosaki does introduce some very good concepts, which are most useful for those where ‘entrepreneurship’ is simply not part of their inner reality. However, Kiyosaki has been commented by several newspapers and journals as being a big fraud (for example on the Wall Street Journal).

    Now I am not sure but the following:

    “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.”

    That’s 144%… that doesn’t seem right? Also I doubt whether even the most financially intelligent person would be able to turn 10k into 1MM within a year…. that’s a 10,000% net worth increase in one year. I have never seen or heard anyone do that, except by winning the lottery or by stock derrivate speculation.

    Cheers, Aleks.

    • Aleks, that’s just an example to show how a person needs financial intelligence in order to grow his or her money. The small percentages tell that few people actually possess such a high IQ when it comes to financial intelligence. Surely, turning $10,000 to $1MM in just one year is close to impossibility.

  9. i have tried to no avail to apply what i know about money to get out of the rat race but a number of factors have been in my way. For instance, recently i intended to start a small business with about 200k and incidentally i was not paid salary for three months i made do with the money which i found out i could not pay back after my salary was restored. I guess it boils down to financial indiscipline. Advise please.

  10. Dear Sir\Madam

    I want to ask about financial intelligent does Mr Robert Kiyosaki book alone good for me to know financial intelligence, if not can you refer me to where i can get this knowledge and be financially independent.

  11. Great blog. I really want to learn about personal finance and I believe this blog is the right place to start it.

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