learn this vocabulary: assets, liabilities, income, expenses, exchange risk, default risk .

A smart task in life is to work towards acquiring assets.

Financial Statement with explanations:

  • assets: an asset is something that makes money every period.
    • passive income is here
  • liabilities: a liability is something that takes money every period.
    • the house is here
    • money
    • things in stock
    • loan for passive income is here

Cash Flow Statement:

  • incomes: is variable income
    • income from passive income is here
    • income from a job is here
  • expenses: is a variable expense
    • expense for the loan is here


  • exchange risk – price may change and lower the value
    • the house is here
    • money
    • things in stock
  • default risk – something may disappear and become insolvent
    • passive income


  • default insurance (swap), it is possible to ensure the loan (for the passive income) against default risk. if it is too much for you.
  • deterioration insurance, it is possible to ensure the house.
  • minimize the risk of exchange exposure  (insure against inflation): use money loan for short-term (current checking account),  store value in market value for long-term, every once in a while sell some real estate to cover the money loan.