Consider this example…
A young woman discovers an ingenious way to bake chocolate chip cookies and decides to open a boutique outlet for her cookies in the local mall. Customers love her cookies and business is booming. From the outside looking in, she is making money “hand over fist.”
But less than a year later she closes her store and swears to never venture into the small business world again.
On closer inspection, you may discover that she failed to control her costs by spending excessive amounts of money on advertising, labor, and rent, and choosing to spend her profits on personal items rather than re-investing the money into her business. In short, she failed to manage her cashflow.
The same rules of cashflow management apply to your home and family budget. If you make $3,500 per month, and you are routinely spending $3,900 per month on what Robert Kiyosaki calls doodads, than you are living on borrowed time.
Here are the three basic rules to managing your personal finances in a way that creates wealth…
1. Learn to spend less than you earn, and do not use consumer debt to fund a lifestyle you cannot afford.
2. Set aside at least 10-20% of your earned income for investment purposes.
3. Place you savings into assets that can provide you and your family with recurring passive income.
That is a simplified view of how controlling your personal finances can lead to achieving financial freedom. It’s not glamorous, and making sacrifices are not always fun. But in the long run, the money you invest today may be paying you back in the form of dividends and passive income for years to come. And that is how the rich get rich.
Ron Taylor is the author of the book, “The Millionaire’s Secret: A Handbook For Building Wealth In Tough Times,” available at Amazon, or by visiting http://www.the-millionaires-secrets.com today.
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