Is your Personal Cash Flow Pattern Correct?

As per Robert Kiyosaki, financial discipline is all about managing your cash flow pattern. It is essential to consistently analyze whether your cash flow and spending patterns are correct.

For analysis, create a simple chart with columns for income, expenses, assets, and liabilities.

Now, examine is your income being depleted in the expense and liability columns, or is it being preserved in the asset column?

Ideally, you should allocate a portion of your income consistently to your asset column for long period of time. And acquire assets that generate income.

You should work on building your asset column over the long term and with consistency. Gradually you should grow your asset column and its income to the point where it equals or surpasses the expense and liabilities columns, so you won’t need to rely solely on your income.

However, what often happens is that as your income increases, your expenses and liabilities also tend to rise.

We have a psychological satisfaction that our income and lifestyle are increasing. But we have entered into a rat race which is a never ending, self-defeating story. This leads to a high-risk, hand-to-mouth lifestyle.

Robert Kiyosaki refers to this as being at the “Financial Red Line,” and individuals may remain there for the rest of their lives. And to maintain their lifestyle, until the end of their lives, they have to keep working.

The point to understand here is that earning money is the ultimate goal for everyone. However, not everybody knows how money actually works.

The money you have or you will earn has the capability to buy you luxuries or a lifestyle, but at the same time, it has the potential to grow further.

If you don’t have an understanding of how to manage your money, then no matter how much you earn, it won’t stay with you for long.

The bottom line is that as essential as it is to earn money, it’s equally crucial to build assets that can generate income and lead you toward financial freedom.