Blog | Personal Finance

How to Get the Financial Education You Were Never Taught in School

From learning to read personal financial statements to understanding good vs. bad debt, this 9-step guide is the crash course you’ve been waiting for

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From learning to read personal financial statements to understanding good vs. bad debt, this 9-step guide is the crash course you’ve been waiting for

If you went to school in the United States, chances are you never received a financial education. Sure, you learned some math and maybe even a few basic skills about how to balance a checkbook. But those concepts are just the tip of the iceberg, and far too many adults never bother to explore the enormous mass of frozen financial education found underneath the water.

How is financial education important?

The wealthy are living proof that financial education is one of the most important life skills you can have. Without it, how do you learn about using a credit card properly? How do you learn how to create a budget? How do you learn to invest in the stock market? How do you become a real estate investor? How do you manage a retirement account?

These basic life lessons simply don’t exist in our school system. In fact, our government has failed generations of students when it comes to getting the financial education necessary for them to succeed in life. Maybe it’s by design, to keep the masses working for corporations and in debt up to their eyeballs (see Lesson 4 below). Maybe they’re aware of the miss, but don’t know how to change the curriculum accordingly? Or maybe it’s a massive oversight — but that sure seems unlikely, given the attention it receives.

According to the Survey of the States — a comprehensive look into K-12 economic and financial education, conducted biennially by the Council for Economic Education — as of 2020:

  • only 21 states require high school students to take a course in personal finance, and

  • only 25 states require high school students to take a course in economics.

You don’t need a higher education to see that that’s a failing grade.

Where to get a financial education

As an adult, it’s imperative you take matters into your own hands and teach yourself these topics if you ever want to get out of the rat race. And, if you’re a parent, you’ll need to provide this financial education to your children at home, on your own time, since you can’t rely on their schools to do it. I’ve gathered a number of resources to help you with both scenarios:

Lesson 1: Personal financial statement. One of the foundational elements of financial literacy is understanding how to read and understand a personal financial statement. What is a personal finance statement, you ask? It tracks your income, expenses, assets, liabilities, and cash flow — each of these is crucial to not only understanding your personal financial standing, but they are also a barrier to entry when it comes to any investment opportunities. If you do not understand these concepts, the only way you’ll succeed in investing is by sheer luck (and how often can that luck be repeated?). Learn how to read your personal financial statement today.

Lesson 2: An asset vs. liability. You’ve probably been told that your house is an asset, but I’m about to burst your bubble: Your house is actually a liability.

Simply defined, an asset is anything that puts money in your pocket, while a liability is anything that takes money out of your pocket. Once you learn the true meaning of assets and liabilities, you can get clever and find ways to turn your liabilities into assets.

Lesson 3: Cash flow vs. capital gains. Many people invest for capital gains (the difference they’ll earn when they sell their house for more than they owe on it), but that’s basically a gamble.

Instead, savvy investors choose to invest for cash flow (the money you’ll earn from renters each month after your mortgage and expenses are paid) and enjoy the passive income and real estate domino effect that leads to achieving your financial independence.

Lesson 4: The CASHFLOW Quadrant. I alluded to this earlier, when I mentioned “the masses working for corporations.” You see, the CASHFLOW Quadrant is made up of four types of earners: Employees, Small business/Self-employment, Big business and Investors.

Employees are people who rely on paychecks and have no control over their earnings — and while that’s the more “traditional” path, I’d argue it’s only popular because most people don’t have the financial education needed to move to the other side of the Quadrant. But once you learn how to redirect yourself to the right side of the Cashflow Quadrant, everything will fall into place.

Lesson 5: Your wealth number. Regardless of how wealthy you may or may not be, you have a wealth number. If you’re making money through passive income (hello, cash flow) and bringing in more than you spend each month, than you’ll have an infinite wealth number. Find out how to calculate your wealth number so you can see the reality of your current situation. Don’t worry, it might only sting for a second — but it could be just the kick in the pants you need to make some life changes!

Lesson 6: Seek expert advice. Choosing the right partners in life — whether marriage or business — will make or break your outcomes. For starters, you’ll want to find the right mentor and coach (yes, they are two different things). You’ll also want to seek out a financial advisor you can trust (hint: learn how to interview financial advisors to ensure they’re the real deal before you make a commitment).

Lesson 7: Know your asset classes. There are five asset classes to learn about — but you only need to learn the basics, really. Once you learn the fundamentals of each, most people will find one or two that really resonate with them and sink their teeth into learning as much as possible about those.

For instance, I’m really focused on real estate investing, cryptocurrency and commodities, and not super interested in paper assets. And that’s OK, there’s no need to spend time on things that don’t interest you!

Lesson 8: Take advantage of free training. There’s no shortage of online or community options for getting some highly targeted education, but of course I’d recommend starting with the free classes Rich Dad offers. There’s a personal finance course called Choose to Be Rich, a few real estate courses (How to Create Real Estate Cash Flow and How to Invest with Other People’s Money are popular options), and some stock courses as well. Not sure where to start? Take this quiz to determine your ideal path out of the rat race you’re currently stuck in.

Lesson 9: It’s normal to make mistakes. It’s rare to find a linear path to success. In fact, most successful investors and entrepreneurs have at least one major failure under their belt (if not several). I’ve made some very big blunders myself, so I’m certainly not immune to this ego-crushing experience.

But I never gave up, and that’s all that matters at the end of the day — how you handle setbacks literally dictates your chances of success. Your mistakes don’t define you, but how you handle them does.

So there you have it: nine ways to tackle the important task of giving yourself (and your kids!) a financial education. Don’t let this comprehensive list overwhelm you — simply choose one of these lessons and dig in. They don’t have to be done in any particular order and they don’t have to be done quickly. The sooner you start making progress, the sooner you’ll be ready to pull the trigger on some changes that will positively impact your future.

Original publish date: July 08, 2021

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