The art is not in making money, but in keeping it
– Proverb quote
The wealthy have money skills that make them wealthy. I touched briefly on the seven skills of money in my last post.
The seven money skills the wealthy have in common are how to value, control, invest, save, make, shield and share money.
We are going to look at another powerful money skill of the wealthy. This one skill is important, to develop an investing mindset.
Before we go on to talk about the money skill I am going to share with you a recent finding from an authoritative source.
According to a recent study published by the Indiana Business Research Center at the Kelly school of business, Indiana state University, the average lifetime earning for a 40-year full time career in the United States to be between $900,000 and $1.4 million. The IBRC arrived at this figure using the 2008 U.S Census Bureau estimates. This finding also mirrors that of the United Kingdom and other developed Countries.
Why have I cited this study?
I cited this study to show because the average working adult have significant money flow during their working lifetime. In addition if this money flow is properly managed, the average Joe should be comfortable in his retirement.
Sadly this is not the case.
The question then is …if we are likely to earn such a huge amount of money over 40 years, why is it the majority of retired adults are broke?
This question brings me to the next money skill of the wealthy I will like to share with you today….
The control of Cash flow
The wealthy know how to control their cash flow. The wealthy have a canny ability to control their cash flow and direct it to create more money.
This one skill, taking control of your cash flow- is what separates the top 3 percent of household that control over 60 percent of the assets in the United States. If you look at other countries of the world, the same phenomena holds true.
There are two ways cash flows, into your hands in the form of income or out of your hands by way of expenses
How you earn and spend, your money will determine your financial prosperity.
How do you take control of your cash flow?
Become your own financial engineer
The first step in gaining control of your money flow is to organize your financial affairs into a simple system.
Let me explain this with a simple analogy.
Picture your income as money streams flowing from your work, business and investment mountains into your reservoir-your bank account.
We all have monthly expenses, liabilities and financial obligations. Now picture this as your money leak.
I would now like you to go a step further I want you to put on the hat of a “financial engineer” who is trying to keep your reservoir full by plugging the leaks.
You can reduce your money leaks to a minimum or allow your money reservoir to leak continuously day to day month to month.
The net effect of not plugging your money leaks, from 40 years of money flow is why 80 percent of adults are financially dependent on the state and relatives for support at retirement.
The good news is you can avoid making this mistake.
What you need is to develop a system to- reduce the money leak from-your money reservoir… so you have an overflowing reservoir of money starting today.
When I became aware of how my spending pattern affected my future wealth-my money habits changed.
Here is another fact about money. Most of us have a “money flow system” but we only allow money to flow into and out of our hands.
Why you need a reservoir
Before I go on let me, share why you need a money reservoir.
You need a money reservoir in case you are…
- family emergency
- You lose your job… you still have to pay your bills
- retired and cannot work anymore
- making a house purchase
- have educational obligations to your children
Most financial planners advise you keep at least 6 months of your expenses in cash to take care of emergencies.
The key to developing an overflowing money reservoir is to categorize your leaks, and monitor how you spend money. I found these categories in the Robert Allen’s bestselling book Multiple Streams of Income: How to Generate a Lifetime of Unlimited Wealth
Recognize the money leaks
Here are some money leaks categories. Feel free to modify them to suit your circumstances.
- Giving or tithing to your church or charity… by giving you are planting a seed with your money to give to a higher cause.
- Self…..this mean you pay yourself first-you save a apart of your income
- Taxes … are money leaks you cannot plug in your adult working life. taxes help to pay for government and services
- Shelter because you need somewhere to live that is one leak you will have
- Household leaks for food , gas , electricity and other expenses to keep your shelter liveable
- Auto. you will need a car to move around , go to work but it also cost money
- Fun and entertainment leaks, money you will spend on your night outs, movies
- Insurance leaks. You need car insurance, life insurance, medical insurance, liability insurance to protect yourself and your family.
- Debt and miscellaneous leaks. These are money leaks from making credit card payments, personal loans and other expenses not listed
- Business leaks, if you own a business then list them. Your business expense can drain your money reservoir quickly, especially if you are in the wrong business
Here is the secret to how the wealthy become wealthy.
The rich look for Money Mountains to add streams of income to their money reservoir. In addition, the wealthy reduce their money leaks.
I already feel you may be wondering…how I am I going to follow all your recommendation? The answer is simple.
Just do it. Your decision take control of your cash flow with this simple system will change the direction of your on your financial life. When you start to take control of your cash flow, you are turbo charging your wealth-building plan
My life changed when I took action to take control of my money flow.
Here is one thing I want to leave with you today.
When you are able to control your cash flow and plug your money leaks, you have set the foundation for your financial prosperity.
Think rich and grow rich
Akin Osho
