Monday, January 30, 2012

The Big 8 Formulation of Financial Quotient (Part 1)

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# 1. SORTING OF PRODUCTIVE AND CONSUMPTIVE PURPOSES

Economics learn human behavior in meeting their needs. In essence, the science of economics learn three things, namely: production, consumption, and distribution. In today's modern economy, the distribution activity is categorized as a productive activity, because the distribution to create value-added. This means, the offender is a distribution business that creates money by creating value.

Consumption is the spending act of value to an item. Consumption means sacrificing some money that will never come back. So what do we get? Satisfaction, use value or utility. If we buy clothes, we spending some money. But we benefit from the clothes, which is the body protected.

Meanwhile, the production is to create goods and services that have value to society. In production, we spend some money as capital, but would later return with the expected value is greater. The difference is profit, which in economics is value added.

CORE OF FINANCIAL QUOTIENT

Our daily actions, which are spending money, can be categorized into two types; productive or consumptive. Try making a list of 50 things you normally do every day. These activities were aggregated into production or consumption activities. Which includes activities such as consumption of a car wearing to the mall, eat, buy snacks, pay for service vehicles, pay electricity bills, buying clothes, paying installments family occupied homes, and others. The cost of school children also includes consumptive activities (from the standpoint of parents), because the change rate (rate of return) is difficult calculated. Even so, from the perspective of children, education costs should still be considered a long term investment.

Meanwhile, productive activities that include, among others, working in the office, to be used car sale broker , working on graphics script-writing/desain ordered by clients, buying a car (for rent), etc..

Do not be surprised, 90% of the items of our daily activities is a consumptive activity. But its okay, that is not the point. What matters to you is to reconsider any item consumptive activities. Really worth the money spent? Why should join fitness at a rate of $ 500 a month, if there are other alternatives that are only $ 10 once it comes? Why you should buy a dress for $ 100 if there are other options with one-fifth the price?

# 2. DISTINGUISHING ASSETS AND LIABILITIES 

The most important lesson from financial quotient expert like Kiyosaki is a theory to separate clearly between assets and liabilities. Many of the liability that looked as if an asset, so we feel rich (but actually poor).

For example, private cars and private homes. In accounting, the second type of asset shall be recorded in the asset column. But for Kiyosaki is not the case. Private homes and private cars are a liability. Why? For the installment of two types of property that can drain 40% of your monthly income.

What distinguishes the assets and liabilities? Cash flow. Once again, the flow of cash.

Asset
Assets are assets that provide cash flow for your finances regularly. That every time to help you succeed financially. Which include the assets are:

• The rooms in your home that rented for student boarding
• Houses are contracted
• Car for rent
• The land productively cultivated or leased
• Money invested
• Intellectual property that gives royalty
• Works copyrighted / artwork that gives royalty


Liabilities
While liability is a treasure that drain the contents of your pocket on a regular basis. Most of the consumption list you could in principle be classified as a liability, for example: 

• Mobile phones, televisions, refrigerators, and other electronic goods
• Personal vehicles
• Private home
• Collection of clothing, including shoes
• Membership in certain clubs
• Credit Cards

Cut off your liabilities, and have as many assets that can provide for your cash inflow. That way, you will improve your financial condition. Expenditure savings could be allocated as inventasi, to supplement the income side of your cash.

If that liability can not be avoided, use the cash method of payment that you are not charged interest for something that is consumptive. If you have to pay interest, try as much as possible so that the purchased items have productive value, so the object can pay his own mortgage. (Financial Quotionent.. To Continued

 
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