What Does Your Financial Tomorrow Look Like?
Moving beyond the Industrial Age to take control of your financial future
When I teach how to get your financial life in order, I start by asking students to fill out a personal financial statement. It often becomes a life-changing experience. Financial statements are much like X-rays. Both an X-ray and a financial statement let you see what your unassisted eye cannot see.
After filling out their statements, it is easy to see who has financial cancer and who is financially healthy. Almost always, the ones with financial cancer are those with Industrial Age ideas.
The ethos of the Industrial Age
Why do I say that? Because in the Industrial Age, people did not have to think about tomorrow. If you worked hard, your employer or the government took care of you and your tomorrow. That is why so many family and friends told me to get a good job when I was growing up. They wanted me to have the security of a good retirement plan.
That advice was based on the ethos of the Industrial Age, an ethos based in entitlement. Today, the rules have changed; companies no longer give out pensions and they don’t worry about your tomorrow for you.
Yet, many people have not changed the way they respond to the rules. They spend their money like there’s no need to plan for tomorrow. When I read a person’s financial statement, it’s easy to see what tomorrow might look like for them.
What does your tomorrow look like?
When I say financial statement, a lot of people get nervous. They expect a complicated document that only an accountant can read. That’s not what I mean. I like to keep it simple.
This is what I look for in a personal financial statement:
If you have no assets to generate cash flow, you’re likely to have a tomorrow that is filled with struggles and stress. Usually, I find that those without assets are working hard for a paycheck to pay the bills. If you look at most people’s expense column, the two biggest monthly expenses are taxes and debt service for long-term liabilities. Their expense statement looks like this:
In other words, the government and the bank get paid before they do.
Here’s a true but sobering statement: If you can’t get control of your cash flow, you will have no financial future and will find yourself in serious trouble in the upcoming years.
Why? A person who only operates in the E (employee) quadrant of the CASHFLOW Quadrant has little protection from taxes and debt. Even an S (self-employed) can do something about these financial cancers.
Start with financial education
Getting control of your cash flow is hard to do if you don’t know how money works. The first step towards building a strong financial future is building a strong foundation of financial knowledge.
A good financial education will teach you how to put money to work for you instead of you working for money. It will teach you how to find and purchase assets that put money in your pocket every month, how to eliminate bad debt, and avoid getting caught in the rat race of accumulating liabilities that harm your financial future. It will teach you how to build wealth for a lifetime…and how to keep it.
As the old saying goes, knowledge is power. I encourage you today, invest in your financial education and start building a secure tomorrow.