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six financial liabilities that everybody
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needs to avoid. Number one of it is a
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business that does not bring money into
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your pocket but rather takes money out
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of your pocket. The aim of a business is
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that it should make you rich, not poor.
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Now, how do you know if a business is a
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liability or is an asset? First of all,
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whichever country that you are watching
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this from, I want you to Google what is
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the rate of inflation in your country.
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Now your business is supposed to beat
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the rate of inflation in your country
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otherwise you have not made money. It
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means the money that you have invested
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in the business plus the profit that the
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business has made when compounded when
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added up when you look at the percentage
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of growth it should be more than the
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rate of inflation and this includes even
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the appreciation of the assets of the
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business. Otherwise you are just working
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for nothing. You are not making money.
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Even if you think that you are that is
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one thing that you used to know that a
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business is a liability. The second one
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liability that you need to avoid is
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that is more than what you can afford.
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How do you know the rent is more than
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what you can afford? If your rent is
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more than 30% of your monthly that is if
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your monthly rent is more than 30% of
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your monthly income then you are making
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a financial mistake. you have to
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downgrade and get something smaller. The
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third financial mistake that everybody
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financial liability that everybody needs
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to avoid is a car that you cannot
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maintain or a car that you cannot
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afford. How do you know that a car a car
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that you cannot afford? Now, this is
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going to depend on your net worth. If
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your net worth is less than $50,000,
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whichever country that you are watching
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this from, you can go to XE Converter.
1:53
You can write the amount and you can see
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what it means in your country. If the
1:58
amount of money that you have or your
2:01
weight is less than $50,000,
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your car should not be more than 5% of
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your net worth. If your net worth is
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between 50,000 and $250,000,
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your car should not be more than 10% of
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your net worth. If your net worth is
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between 250,000 to 1 million, then your
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car should not be more than 15% of your
2:24
net worth. If you notice, you see that
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the more money you make, the more you
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can afford to increase your budget on a
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car because earlier on when you start
2:33
you have to invest most of your money
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and when you begin to make money, you
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can afford to be flexible. But that
2:39
means that you still have a lot of
2:40
money. Now irrespective of your net
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worth if your car is close to 50% of
2:48
your net worth you are already making a
2:49
big financial mistake it is not
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everything that you can afford that you
2:54
should buy if you drive a Toyota Corolla
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even though you can afford a Benz that
2:59
is financial wisdom if you drive a
3:02
Toyota Corolla because that is the
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maximum that you can afford that is a
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financial mistake it is not everything
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that you can afford that you should buy.
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The fourth biggest liability that you
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need to avoid is high interest loans.
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I would advise you to not take loans at
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all. But if you have to take loans, you
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have to use those loans to buy things
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that are income producing assets. It
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means that they produce money. They put
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money into your pocket. You don't borrow
3:35
money to buy a car. That is wrong. If
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you are borrowing money, the money has
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to be in something that makes you money
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except if that car is going to make you
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money more than the rate of interest of
3:45
the loan and also provide security.
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Okay? So that the money doesn't get
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lost. The fifth liability that everybody
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should avoid is negative friends. That
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means friends who put pressure on you to
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spend on things that they would never
