People end up with this cashflow pattern by following the tradition advice that most of us have heard: Go to school, study hard, get good grades, go to college, get a "good" job, get married, have kids, etc.Ī "good" job really meant a "secure" job that would provide you with regular raises, health care, and a retirement plan. The middle class is also dependent on earned income. On the bright side, this cashflow pattern does not have a lot of debt, which can make wealth easier to acquire! People who win millions of dollars from state lottery's tend to fall into this category. Sadly, many people in their 30s and 40s have never "graduated" from this level.Īll of their earned income is spent on things like expensive cars, iPhones, the latest computers, fast food and dining out, expensive clothes, and of course, taxes. This cashflow pattern corresponds to immediate gratification. Their have money, so they spend it.Ĭashflow Diagram indicating Poor Financial Health If you don't like the term "poor", think of this as the cashflow diagram of someone in high school or college. from a job), and a majority of that income is immediately spent on "things" or as Mr. In this category, all of a persons income is earned (i.e. When your finished organizing your personal finances, accept them as reality and say "OK, now what changes can I make?". The fact that you're here, trying to learn how to better organize your personal finances is an encouraging sign. The importance lies in understanding the decisions that drive each one, along with the impact that they have on your personal financial health, so there are no surprises later on! Poor, Middle Class, Rich, and Wealthy actually refer to your thoughts on money, not your income.Īs you'll see, you can have a lot of money and be poor! They represent how money "flows" through different types of financial situations.Īnd there is nothing wrong with any of these cashflow patterns. The illustrations are meant to show you a different way of thinking when it comes to organizing personal finances a way that shows you where your money is going. Assets vs Liabilities ( Personal Balance Sheet)īefore we begin, please note that the following cashflow patterns are oversimplified, yet powerful examples.Įveryone has bills to pay in some form (taxes, food, gas, clothes, shelter, etc.), but organizing personal finances is unique for every person/family - all situations are different.Income vs Expenses ( Personal Income Statement).Kiyosaki, there are four key terms that you must understand in order to go about organizing personal finances properly: Organizing personal finances can be a tricky task if you've never had any experience with financial statements or personal budgets.īut Robert Kiyosaki, best selling author of the Rich Dad Poor Dad series of books, developed a great (meaning simple) way to visualize your finances.Īccording to Mr.
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