Rich Dad Lessons: Take control of your cash flow
Based on Kiyosaki’s work
Most people think their financial problems will be solved, when they can make more money. The truth is that in many cases the only thing they achieve is an increase of their money problems, because they end up getting in debt again and every time with bigger debts. They have a mental illusion, when they consider that by making more money, will be able to assume debt without any inconvenience.
Unless the acquired debts are “good debts” which somebody else ends up paying (for example, a house for rent where the tenant pays the mortgage), the debts don’t let people advance. Actually, debt makes people live under constant financial pressure while it ends up, in some cases, producing discouragement and depression.
It doesn’t matter if you earn $300 or $3,000,000 per month. You should learn how to control your cash flow. Many times, that includes to overcome the social pressure produced by a consumption society bombarded constantly with ads that encourage people to buy things or knick-knacks producing only a momentary satisfaction and no long-term advantage.
There are some tips here:
1. Eliminate your credit cards, except one. You doesn’t need more than one credit card. One is enough. From now on, if you make any purchase by using your credit card, it should be entirely paid on the next payment, not in several months.
2. Think about how you can earn or save $150 or $200 extra a month. It is not so difficult if you are decided. Almost any person can either earn or save that amount of money. If you make a budget of your expenses, you could be surprised for all money you spend on useless things.
3. Take the extra $150 or $200 and increase your credit card payment. Now you will be paying the minimum payment + $150 (or $200).
4. Once you finish paying off your credit card, continue with other consumption debt, by adding the extra $150 or $200 to the monthly payment that you usually have to pay. The other debt can be another credit card, appliances debt or any thing different to your house or car.
5. Once you have paid all the consumption debts, transfer those additional funds to your mortgage or your car payment.
6. When you are debt free, take the additional funds and put them in a bank account or fixed-income securities (low risk). Put the money there month after month. This money won’t be spent until you find assets that generate positive cash flow per month.
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