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The Correct Cashflow to Accumulate Wealth
These days people are finding themselves buried under a mountain of debt with no where to turn. How much more debt can one bear? Why is it that people are finding themselves in this mess. I remember when I was a kid, we had just one family car, one TV in the house and anything we wanted it was bought with cash. If we didn't have cash we didn't get it. Nowadays, with credit, you can just about get anything you want today on a promise that you will pay for it tomorrow. So in reality people are spending anywhere from 18-24% more on something they might want or need; and that's if they pay it all back by the end of the year. But you will find that's not the case with most working middle class people. Cars, boats, vacations, and even everyday essentials such as food will be purchased with credit. With some people its at the point where their entire paycheck goes towards paying off their debt with very little if anything to put away or to use to purchase something they actually need. When someone finds them self in this position, what do they do? That's right; increase their credit. The debt grows, and eventually catches up and overpowers their income to a point that it becomes virtually impossible to pay off their debt. What happens next is they will usually consolidate that debt into a larger loan with longer terms. Now what they have purchased costs them two, three, four times as much as the purchase originally cost. But it does not stop here. They now have a zero balance on all available credit, and the whole process starts over again. This time it gets worse, their entire income cannot cover the monthly payments of accumulated debt, their credit ratings begin to take a dive, sending them into a slow downward spiral towards financial disaster. Why is this happening to so many people today?
1. They do not know how to use money correctly. Most people are buying non producing liabilites first, instead of buying assets or producing liabilities. You need to purchase a producing asset or liability first which can produce enough income to pay for the non producing liability while the producing asset's equity is increasing. This process will allow you to accumulate non-producing liabilites, virtually for nothing. In the long run it didn't cost you a dime of your own money. Actually, you now own a non-producing liability while your net worth has increased. The Cash Flow of the poor: Job -> Income -> Expenses
The Cash Flow of the middle class: Job -> Income -> Liabilites -> Expenses
The Cash Flow of the Rich: Job -> Assets -> Income -> Libilities -> Expenses
2. Because they lack the knowledge of how to leverage money. You must think of a dollar as if it were a "seed". Once you plant the seed it will grow to two, two into four, four in eight, eight into sixteen, and sixteen in thirty two, etc.
In reality if you use the correct strategies and techniques you could actually buy all your wants and desires without ever touching your primary income or increasing the amount of bad debt you would normally accumulate. This is where the term comes from "using other people's money". What do you think the banks and large corporations are doing. Educate Yourself
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