Financial health is a very broad term itself. It is one aspect of man's overall health which has to do with the financial condition of an individual, firm or associations. It can also be referred to as your financial statements in terms of money, assets or properties in your possession. Because financial health is a very important scope of human health , it can be divided into three broad parts; namely
Low or minimum financial health, average financial health, and high or maximum financial health.
Low financial health:- low financial health can be referred to as a financial condition or situation in which the average resources, income or earnings of an individual, firm, group or associations are very insufficient for the total expenditure or financial needs of such an individual or group
People in this group: ln a layman's understanding, these are people referred to as low income earners or lower class. Most of them dwell in rural areas engaging in all kinds of menial jobs for survival. Typical example are local farmers, Palm wine tappers, hole daggers, small business retailers and so on. These people just earn enough for their feeding on daily basis. They have no established or big business and most often are illiterates. Sometimes they appear nonchalant about how to make more money and even if they care , they lack the knowledge for such engagement. A times they seem to be contented with what they have; but actually working and suffering hard for a very low income. Many of them also live in cities and some are very educated, even graduates from a university can belong to this group provided that your financial status is very poor compared to your basic financial needs.
Average financial health:- Average financial health has to do with a financial situation in which the average income earned when compared to average expenditure are equivalent. This level of financial health is what could be referred to as lukewarm health. The financial history goes in a cycle; from income to expenditure and back to income. With no tangible savings or establishment from the income.
People in this group :- These are people generally regarded as middle class in the society. The are most often the educated ones who work in different government establishments for monthly or weekly payment as the case may be. Obvious examples are school teachers, bankers, officers in various government offices and other workers found in both government and individual companies. They live entirely on their income and focus mainly on working hard to earn more income. Some go to the extent of bagging so many degrees in order to have more opportunities in work places. They know little or nothing about establishing personal business and working independently. These set of people most often do not pay much attention to their personal life or family due to the time consuming nature of their job. I call this group of people literate slaves because the know how to serve and serve wholeheartedly.
High or maximum financial health:- This level of financial health is the highest of all. It is a situation whereby the total income is far more than the total expenditure within some space of time. This kind of financial status comes from big capital investment or assets
People in this group:- people that can be classified in this group are big business Investors, company owners and Marchants. These are people that really control the economy of their nations through business. The make big investments and create work opportunities for people. Some big companies employ up to 500 workers or even more. Therefore they tend to reduce government workload. In a simple term l refer to them as pillars of the nation.
Financial quadrant
Now let us look at where your financial status belongs. Robert kiyosaki in his book "Rich dad and poor dad" classified every human financial endeavours into four quadrants ; E-quadrant, S-quadrant, I-quadrant, and B-quadrant.
E-quadrant:- According to kiyosaki this simply means employee's quadrant. It is the where you can classify every person working for somebody for a weekly or monthly payments. The group of people usually exhaust their life working for someone or their employer. They have no business of their own or any assets and depend entirely on their salaries for survival. Most teachers and bankers are quick examples, even CEOS of big companies belong to this quadrant.
S-quadrant:- This also means self - employed quadrant. People in this category usually own their business and work earnestly in order to improve and sustain it. They are always there to give services themselves in their businesses. And once they stop working their business collapses. Most medical personnels belong to this quadrant. Even barristers and Lawyers and small business owners are in this category.
I-quadrant:- This is mainly investors quadrant. The invest in big business and sometimes invest for capital gains. The look out for opportunities that will favour their investments and where there is high possibility of making huge interests or gain on the invested capital within a space of time. The major people in this group are shareholders in a company.
B-quadrant:- This means big business owners or investors. The are the real business tycoons and are jobs creators. Many of them have 500 or more employees in their companies. They are the real capitalists and entrepreneurs. Practical examples are mark Zuckerberg, the owner of Facebook company, Steve Job, the founder of apple company, Henry Ford, Bill Gates and so on.
The E, S, I and B quadrant; reason for the differences in financial status of the four.
Talking about the reasons why many people belong to different financial quadrant, their source of income plays the major role. Robert kiyosaki in his famous write up, "why A students work for C students and why B students work for government" classified sources of personal income into three different categories. They are :
Ordinary income:- This is what we generally regard as paycheck or monthly or weekly payment depending on the terms of the payment. Most often this type of payment comes at a fixed amount and can only be earned when working for or under somebody. It stops when you stop working and this is the type of income earned by those in E-quadrant.
Portfolio income:- This is income earned as capital gain on a particular investment. Eg when you buy a commodity at the price of N1000 and within some days, you are able to sell it at the price of N1500. The N500 is your capital gain. A capital gain occurs when you buy and sell at a higher price. Most investors invest for portfolio income. People in S and I quadrant earn this type of income.
Passive income :- According to kiyosaki, he calls this type of income cash flow. It is the type of income that comes from real investment such as rental properties, real estate business, established companies, transport business and so on. Passive income does not require your constant presence, if at all, for it to be earned provided you have established the source. It is an income that enters your pocket even when you are not working. It is what your personal investments yield for you on daily, weekly or monthly basis. For instance, many businesses men now build mansion and rent it out to tenants, collecting their rent on monthly or yearly basis. Without having to toil for the income anymore. They have created solid investment that yield money for them whether they are working or not. This is the type of income that most rich people earn. Most entrepreneur, business owners and capitalist invest for this type of income.
Which quadrant do you belong?
It is very important that you ask yourself this all-important question, "which quadrant do l belong to and why" most rich people belong to B and I quadrant while most poor people and the middle class belong to E quadrant. Some rich men also belong to the S-quadrant because they are self-employed, for example doctors and Lawyers. Then why are there many poor people?
The issue of money is a very critical aspect in one's life. Your financial status tell a lot about your human capacity. The way to building solid financial foundation is utmost for achieving quality financial health. The basic foundation for this quality financial health is what kiyosaki usually refers to as financial education. The absence of financial education is the reason why many people are still very poor even when they might be educated. Robert kiyosaki would always say that our formal education in the Universities does not equip us with the financial education necessary for us to succeed in the real world of business and financial management. The school most often prepare us for E and S quadrant, that is bagging good grades in order to get a well paying job when you graduate. This automatically places you at the employee quadrant. Or you can study a professional course and become a doctor or a lawyer but yet you are just self-employed. Working day and night to make your money. The most important aspect of this financial education is the ability to migrate from the poor quadrant(E and S) to the rich quadrant(I and B).
How can you change your quadrant?
Robert kiyosaki in his book "Rich dad and poor dad" believes that being poor or rich lies in the full understanding of two basic financial concepts; namely, ASSETS and LIABILITIES. now let's explore these words, what is assets and what is liabilities?
Assets :- assets can mean many things to some people in different context. But when it comes to making money, kiyosaki regards assets as something that puts money into your pocket or account. You can as well say it is the source of one's income.
Liabilities :- this simply means what takes or removes money from your pocket or account. It can equally be referred to as your everyday expenditures. Then what is your assets and liabilities?
They reason why many people are still poor despite the fact that they are working very hard and as well highly educated is because they fail to understand the difference between these two concepts; assets and liabilities. People mistake liabilities for assets and spend their money acquiring liabilities instead of assets and end up struggling financially in life. Since assets are things that give you money, it means that your assets are your investments. Not necessarily your monthly or weekly salary but real investments such as houses for rents, transport business, production and marketing business, established business companies, real estate business, marketing stores and shops and so on. As an individual seeking for financial freedom and really want to climb high on your financial ladder, you must try as much as possible to create assets for yourself from whatever little income you have. This will go a long way to making you financially stable. I would recommend you to read "Rich dad and poor dad" by Robert kiyosaki. It will be a great insight for you. Acquiring liabilities such as personal cars, luxurious apartment with expensive rent, costly outfits, and other money-consuming engagements with out any asset will only crumble your financial foundation and make you struggle harder in order to maintain those liabilities. That's why many educated people without financial education who work for a paycheck or salary and acquire so many liabilities, find it difficult to cope financially even when their monthly payments are quite substantial.
Finally, the basic prerequisites for good financial health is financial education. Learn how to acquire assets in your life time and avoid liabilities at the early stage of financial growth. A time shall come when your assets would make you so rich that you don't need to worry about bankruptcy. Then you can have as many liabilities as you wish. A saying goes that health is wealth, but health without wealth is endangered.
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