Whether you realize it or not life is constantly dishing out lessons to those
who will pay attention the unfortunate part is that most people fail to see the
lessons right in front of their eyes but in this video i'll be revealing five
money lessons that will change your life so make sure you pay attention and if
you're new to the channel then hit the subscribe button below for more
life-changing content lesson number one understanding assets versus liabilities
assets and liabilities are the fundamentals of every business and
individual's balance sheet although these two elements are different the
purpose of both should be to increase future prosperity now if you're
unfamiliar with what assets and liabilities are let me briefly define
them both right now according to accounting standards assets possess the
ability to provide economic benefit now or in the future liabilities on the
other hand are financial obligations you must meet in the near or distant future
in short assets put money into your pockets and liabilities take money out
of them now before i explain how both assets and liabilities can significantly
improve your financial life we need to clear up the confusion around a few
possessions that many people have that are often misclassified and the first is
your principal residence ask most people and they'll tell you that their home is
their greatest investment and while it's true that your home does appreciate over
time it actually has more traits that are aligned to liabilities than assets
for instance when you own a home you are constantly having to put money into it
in the form of renovations repairs taxes etc and remember that i just define
liabilities as things that take money out of your pocket this same example can
also pertain to other personal properties like cars and boats which are
assets on your balance sheet but are very deleterious in your quest to
achieve financial success on the contrary we have liabilities or debts
and sadly most people have learned to vilify these potentially powerful
financial tools you see yes certain forms of debt like credit card and auto
loan debt can be destructive to your financial life but when used properly
some forms of debt can significantly raise your financial profile for example
if you take on low interest debt in the form of a mortgage you can use that
money to acquire a rental property that will not only appreciate over time but
will pay you every single month now you may be wondering why not just use my
cash to obtain these assets and here are two reasons why this may not be the
right financial move first most people don't have the cash to purchase income
producing assets like real estate businesses or dividend stocks second
there's an opportunity cost to everything you do when you use your cash
to buy stocks you then can't use that cash to buy a property therefore by
taking on low cost debt you can gain more leverage acquire more assets and as
a result significantly improve your financial position over time lesson
number two realizing the cost of looking rich believe it or not keeping up with
the joneses has been a part of many people's lives even before the advent of
the internet it appears people have a tendency of trying to imitate someone or
own something that is not only unnecessary but also beyond their
financial means sadly wasting all the money you've worked for just to try and
keep up is an obsession that many people struggle with let's face it the internet
has only made the keeping up with the jones's problem worse constantly seeing
the flashy pictures of matches and fast cars can push you into buying expensive
phones new outfits or buying a high priced handbag basically pushing you to
spend on meaningless items however while these items may seem unnecessary common
sense is imperative at this time to avoid living beyond their means you need
to put your life under the microscope and examine just how much trying to look
rich has taken away from your pockets personal finance experts generally
recommend that you spend no more than 28 of your income in your home and if your
home is above that rate it's simply that you're living beyond your means living
an extravagant life is one financially unhealthy habit that a lot of people
have they spend a lot of money on themselves and their friends every
weekend and sometimes they just don't have the cash for their household
expenses one way to tell if this is happening is to think about your current
spending situation and calculate your expenses review your purchases from the
last month especially the ones related to eating out spending too much on
friends going to clubs and shopping after that look at the rest of your life
and if you're having trouble paying for your utilities or household expenses
it's time to change your spending habits to better take care of your money as you
already know it is possible to work for a month and earn good money and still
have nothing left to show for it and this typically is a result of having
loose control over your spending ways now luckily there's a fix to this and it
comes in the form of a budget at high level identify how much you're earning
after tax and then list out all of your expenses when you have a net figure you
can start to see how bad or good your spending truly is then integrate an
amount you want to save and adjust your expenses accordingly going back to the
need to look rich maybe your quality bought a new car or your friend bought a
bigger more expensive house who cares i can guarantee that having money at the
end of the month and not having to stay up worrying about bills will feel a
hundred times better than getting another new material possession that you
know you don't need remember that your financial journey is your own and not
someone else's so you can get excited about your own life regardless of what
others have lesson number three learning how to use good debt well it's sad to
say many people are under the impression that all that is evil and should be
avoided at all costs they learn that it is wise to pay off your debt and state
of debt once you're debt free and to some extent this is right however
there's such a thing as good and bad debt and it would be wise to pay off bad
debt or not get into it in the first place simply put bad debt pulls money
out of your pockets and good debt puts money in your pocket now you're probably
wondering how that can be used for good and i'll explain that in a second but
first make sure that you smash the like button so you can ward off future bad
debts debts like credit card debt are bad
debts for two reasons first they are primarily used to buy products with
depreciating values such products include cars big screen tvs and vacation
trips the second reason credit card auto loan and instant loans are harmful is
due to their interest rates using these forms of debt can drown you in interest
charges making it nearly impossible to revert back to being debt free with good
debt however the opposite is true typically these debts are used to buy
cash generating assets and come with much more reasonable interest rates and
this is why the rich in particular use debt to get ahead they use what is
referred to as opm or other people's money from both the bank and investors
opm is a real concept and a sign of high financial acumen by using good debt you
can significantly increase your return on investment by having more capital to
work with when buying assets that will generate cash or appreciate over time
therefore when you find a worthwhile investment you have two choices use your
own money or use other people's money if you structure the deal well the more you
use other people's money the higher your return will be many people think that
it's just a fantasy world where people will just give you money to invest with
but that couldn't be further from the truth the truth is that most people
don't have time to find good deals instead they rely on people with the
appropriate financial education skill set and drive to make these deals happen
lesson number four learning the power of patience many aspiring entrepreneurs
decide to move forward with a new business plan and want to see great
results as soon as possible this can include growth as well as profits while
some businesses may find success quickly the reality is generally positive
business results do not happen fast as they say slow and steady wins the race
whether you're getting ready to start a new business or just starting one out
one trait that can increase your chances of success is patience conversely
inpatients can decrease your hopes of success to encourage patients you must
set realistic expectations if your business plan is realistic you can
improve your budget and prepare spending habits that match your expectations now
if you generally find yourself wanting quick wins don't worry because most
people are like this it's natural to want to make profits sooner than later
but employing patients when they feel this way can help you avoid unnecessary
setbacks and better manage available funds another important factor related
to realistic expectations is your personal motivation level if you expect
fast results in immediate growth you may be disheartened when you see only slow
or no growth so if you expect slow growth and small changes you may feel
more motivated by seeing steady growth anyway in fact your patience can affect
your motivation and overall view of your business activities remember that a
critical element of success is to find a niche before you grow and be the best in
that niche so when you focus so much on rapid growth you may not be able to
build a solid foundation for the business this includes everything from
processes to employees to customers without loyal customers your company is
more likely to fail retaining happy customers is often more cost effective
than finding new ones lesson number five learning how to take risks taking risks
in life is a skill we learn even before we start walking once a baby is
confident enough to transition from crawling to walking safely around the
house that first step is a big risk for them this first risk often ends in
failure and then the child makes a decision am i trying too hard knowing
the risk involved i know it might sound weird imagine that babies think that
much but the point is risk is part of life whether you like it or not every
person to some extent uses this skill to make the best possible choice for
themselves the most important thing to keep in mind when looking at this topic
is that when applied correctly you get a far more positive result than acting
recklessly so how can you do this throughout our lives we make choices to
move our lives in new and unfamiliar directions that end up shaping our lives
and perspectives one of the best ways to improve your risk management skills is
to practice the art of self-reflection if you take the time to look inside and
question why you're making certain choices you will begin the evaluation
process that will naturally take you down the risk management path this
is something that can help us improve our quality of life when applied
correctly hey it looks like youtube thinks this next video is the one that
will change your financial life forever give it a watch and let's see if they're
right