Paying Yourself First Is the Key to Getting Rich

Paying Yourself First Is the Key to Getting Rich by Robert Kiyosaki – Daily Reckoning

Dear Reader,

I have two stories to share with you today.

They say that a picture is worth a thousand words. Study the diagrams below and see if you can pick up some of the distinctions between the two stories. If you’re financially intelligent, you can see important distinctions in the diagrams.

Here is the first story:

Income Statement

Here is the second story:

Income Statement

The Power of Cash Flow

The first diagram depicts the actions of those who pay themselves first. Each month they allocate money to their asset column before they pay their monthly expenses.

The second diagram depicts the actions of those who pay everyone else before they pay themselves. Each month they allocate money to their expenses column and then invest with whatever is left over—which is usually nothing.

If you understand the power of cash flow, you will understand what is wrong with the second diagram. It’s the reason why 90 percent of people work hard all their lives yet need government support like Social Security when they are no longer able to work. The reason is, they pay themselves last.

Cash flow means passive income and that means one thing to me: FREEDOM.

I’m free to do what I want, whether it’s to have a life of leisure or pursue a new business adventure. I am free to be with people I choose. I’m free to set the schedule I want. My time is truly my time.

My number-one goal is to always have more cash flow coming in than is going out for my expenses. When I do that, I’m free. My assets work for me, instead of me working for money.

The Self-Discipline of The Rich

In order to be rich, you must have the self-discipline to pay yourself first. By this, I simply mean using your income to invest in cash-flowing assets before you pay your bills or buy anything fun. This in turn will create more income that you can use to invest in more, cash-flowing assets. Do that and you’ll have more money than you know what to do with.

Paying yourself first is not easy. In fact, it can be scary, especially when the bills are piling up. But you must develop the self-discipline to do it.

Developing cash flow from the asset column seems easy in theory, but in practice it takes mental fortitude to direct money to the correct use. In today’s world, it’s much easier to simply blow money in the expense column than direct it into the asset column.

When you have no self-discipline, your money will flow through the path of least resistance. That is the cause for most people’s financial struggles.

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