One of the blessings of my life was being part of a small group of people who enjoyed learning from Robert Kiyosaki before he became so popular. I was able to participate in many group discussions with Mr. Kiyosaki before his second book “Cash Flow Quadrant” was even in print.

Many of the ideas, which are quite well known now, were the subject of these intimate discussions. One of the things that had an impact on me, was learning the true meaning of several words that are crucial to what he called financial literacy

Income is the money you earn from all sources. Income is used to pay expenses and to invest. Robert said you can’t be rich if you don’t develop a consistent income in the future.

Expenses are costs you pay for goods or services. Necessary expenses are those that you must pay in order to live. These include things like your rent or mortgage, your utility bills and your food. Discretionary expenses are those that you don’t truly need. He said think of discretionary expenses as “wants,” as opposed to the necessary expenses that are your “needs.”

Robert said that what’s important in terms of your personal finances is not what you earn but what you keep.

An Asset is anything that you own. I remember suggesting my home was an asset. Robert said I was correct except since the bank held my mortgage it was their asset not mine. Ouch! Robert told us that a good way to build wealth is to continue to invest your income into assets that generate even more income.

A Liability is something that you owe. Examples of liabilities are your home mortgage, your car payment and your credit card balance. In the simplest terms, an asset puts money in your pocket, while a liability is something that takes money out of your pocket. This was a AHA moment for me. He said the mistake most people make is taking on debt to pay for toys such as boats, Rv’s, and other Doodads. I sank low in my chair on that one.

Robert Kiyosaki is a born teacher. He has a way of making things very simple to understand, and the things I learned from him have made all the difference in the way I think about business and money. By the way, his “Poor Dad” was over the education system in Hawaii.

I remember him asking the group who wanted Financial Independence. After a variety of answers attempting to define “Financial Independence” he offered the following.

Cash Flow simply refers to the flow of money into and out of accounts. “Establishing consistent cash flow is how you’ll achieve financial independence”.

He said focus more on cash flow because once you generate enough income to pay all your expenses, your time is freed up to do whatever you would like. In other words, you are financially free and your job is now an option.

I doubt Robert would remember me, but I’ll bet he remembers those early days when he would drop in on that little group. His wisdom and simple explanations have made all the difference in my life. I recommend reading his books and learning from him at every opportunity.