I did not realize that most people do not think with the same photo references." The Magic Carpet "You are far ahead of the game," said rich dad, "the game of getting rich. I have a term for the income statement and the balance sheet, the two primary reports that make up fi- nancial statements: the magic carpet." "Why do you call them the magic carpet?" I asked. "Because they seem to magically take you behind the scenes into any business, any piece of real estate, and any country in the world. It is much like taking a diving mask and suddenly looking below the surface of the water. The mask, symbolizing the financial statement, lets you see clearly what is going on beneath the surface. Alternatively, a financial state- ment is like having Superman's X-ray vision. Instead of trying Reduce Risk Through Financial Literacy 163 to jump over the tall building, a financially literate person can see right through the building's concrete walls. Another rea- son I call them the magic carpet is because they free you to see and do so many things in so many parts of the world, all the while sitting at your desk. You can invest in so many parts of the world or just in your backyard with so much more knowledge and insight. Improving my financial literacy ulti- mately reduces my risk and improves my investment returns. A financial statement lets me see what the average investor cannot see. It also gives me control over my personal fi- nances, and that allows me to go where I want to go in my life. Having control over financial statements also allows me to op- erate multiple businesses without being in the business phys- ically. Truly understanding financial statements is one of the keys still necessary for an S quadrant person to move to the B quadrant. And that is why I call the income statement and bal- ance sheet the magic carpet." Mental Attitude Quiz If we were going to buy a used car, we would probably want a mechanic to look it over and hook it up to an elec- tronic analyzer before deciding if it was worth the asking price asked. If we were going to buy a house, we would ask a home inspector to go through a checklist and check out such things as the condition of the foundation, plumbing, electricity, roof, etc., before buying the house. If we were going to many someone, we would probably want to know what was really going on beneath the pretty face before deciding to spend a lifetime with that pretty face. Yet, when it comes to investing, most investors never read the financial statements of the company they are investing in. Most investors would rather invest on a hot tip or a low 164 Rich Dad's Guide to Investing price or high price, depending upon the momentum of the market. Most people get their cars tuned up and checked out annually, or had an annual health physical, but most people have never had their financial statements analyzed for flaws or potential future problems.