Reading: The Key To Financial Freedom - Managing Cash Flow Slides

LESSON 9:  THE KEY TO FINANCIAL FREEDOM - MANAGING CASH FLOW

Where Does All the Money Go?

Pay IRS – Taxes! $200,000

Pay Banks – Interest $400,000

Pay Insurance Companies - $50,000

Pay Merchants – Expenses! $250,000

You are Going to Pay Taxes!

“There are three things of which you can be certain.

1.  You are going to die sometime.

2.  You are going to be criticized.

3.  You are going to pay taxes.“

― Peter J. Daniels 

¿How Much Do Taxes Cost?

“You’re taxed when you earn. You’re taxed when you spend. You’re taxed when you save. You’re taxed when you die.“

― Robert Kiyosaki

Income Tax – 15-40%

Social Security Tax – 15%

Sales Tax – 5-10%

Property Tax – 1-3%

Inheritance Tax – 55% Over $1 millon

Intangibles Tax

Use Tax

Gift Tax

Give to Ceaser That Which is Ceaser’s

" A fair tax on income and assets is good. Good for the nation and what is good for the nation is good for its people. 

Fair taxes are good, because thanks to them, a government like the United States can maintain the military power to protect life, liberty and the property of its people.”― W. Clement Stone

Income Taxes: Social justice? Or Envy?

“ And he said, “This will be the behavior of the king who will reign over you: He will take your sons and appoint them for his own chariots and to be his horsemen, and some will run before his chariots.  He will appoint captains over his thousands and captains over his fifties, will set some to plow his ground and reap his harvest, and some to make his weapons of war and equipment for his chariots.  He will take your daughters to be perfumers, cooks, and bakers.  And he will take the best of your fields, your vineyards, and your olive groves, and give them to his servants.  He will take a tenth of your grain and your vintage, and give it to his officers and servants.  And he will take your male servants, your female servants, your finest young men, and your donkeys, and put them to his work.  He will take a tenth of your sheep. And you will be his servants.“

― 1 Samuel 8:11-17

Personal vs. Corporate Income Tax

People with Corporations

1.  Earn

2.  Spend

3.  Pay Taxes

People who Work for Corporations

1.  Earn

2.  Pay Taxes

3.  Spend

Thought: What Would You Do
With $1 Million?

Buy a house?

Buy a car?

Spend it having fun and eating out?

Take a vacation around the world?

Invest it to enjoy a nice retirement?

Read: Seven Cures for a Lean Purse

1 – Start thy purse to fattening.

2 – Control thy expenditures.

3 – Make thy gold multiply.

4 – Guard thy treasures from loss.

Breakthrough Thought:
Financial Success Requires Thinking Long Term

“Which desirest thou the most? Is it the gratification of thy desires of each day, a jewel, a bit of finery, better raiment, more food; things quickly gone and forgotten? Or is it substantial belongings, gold, lands, herds, merchandise, income-bringing investments? The coins thou takest from thy purse bring the first. The coins thou leavest within it will bring the latter.” 

– Arkad, The Richest Man In Babylon

Short-Term Wants vs. Long-Term Goals

Short Term Wants

Uncommitted Sex (unexpected children or unplanned marriage)

Renting a fancy apartment.

Entertainment each week (drinking, parties, movies, etc).

Buying a new car as soon as you graduate and get a job. 

Buying with a credit card (clothing, shoes, eating out, gifts)

Going to an expensive university with student loans.

Trying to “save money” on insurance.

Long-Term Goals

Planning Out Marriage and family

Owning your dream home free and clear.

Going on a vacation to an exotic destination.

Purchasing a car with cash.

Paying all debts off and Becoming debt free.

Going to a university you can afford.

Having adequate protection (life, home, auto, health) by planning ahead for the unexpected.

What Makes the Difference?

Short Term Wants

Pleasure, meeting basic human needs – desire for love, sex, romance.

Satisfying wants “Right NOW!”

Buying on impulse without thinking long term.

Trying to impress friends, family, neighbors, enemies.

Being impatient or unwilling to wait to save.

Ego, immaturity, lack of wisdom.

Lack of financial understanding of how money works.

Long-Term Goals

Feeling loved, secure, and knowing what you want from life.

Thinking long-term. Having goals in life.

Planning ahead.

Developing patience and discipline.

Being willing to work, save, and wait.

A controlled ego, self-worth, security and developing wisdom.

Investing the time to develop financial literacy.

Controlling Expenses

Everybody wants your Money! Watch your Pocket Carefully!

Unwise Giving (Churches, charities, non-profits that don’t bear fruit)

Taxes (Uncle Sam)

Interest (Banks)

Consumption Expenses 

    (Merchants)

Unwise “Investments”

    (“Loans” to friends, 

      business “opportunities”)

Simplified Cash Flow Statement

Beginning Cash

+ Net Income (Income – Expenses)

Pay Yourself First (Become Your Own Bank)

Repay Debt

Purchases

Investments

====================

    Positive Cash Flow

= Ending Cash

Net Income is the Key to Financial Dreams

Good Cash Flow Management

“Plan ahead to meet all expenses of your investment so you will have money when you need it.

 Accurate cash flow management begins with predicting needs.  Begin by making a separate cash flow projection for each investment.“

Monitor your cash flow projections frequently and update them.“

― Paul J. Meyer

Buying a Home or Car is Good,
but Paying Interest is Not

"Through wisdom is an house builded; and by understanding it is established:  And by knowledge shall the chambers be filled with all precious and pleasant riches."― Proverbs 24:3-4

Keys to a Good Purchase vs.
Common Mistakes

Tips to a Good Purchase

Owning is better than renting.

Buy a home where you spend less than 25% of gross income.

Make extra payments to principal each month.

Put down a sizable down payment – 20% minimum.

Buy or live close to your job.

Buy a car with cash you can afford or at most pay it off within 2 years.

Shop around for a low interest rate.

Avoid Common Mistakes

Don’t rent or lease if possible.

If you do rent, don’t get something fancy. Get something cheap.

If You only pay the minimum payment, you will end up paying as much as 2-3x due to Interest!

Don’t pay mortgage insurance.

Try not to buy a new car – it loses 20% the first day.

Try not to buy a very old car – repairs can be costly.

Don’t buy a car or truck that has low gas mileage.

CONCLUSION: Cash Flow Management is the Key to Financial Freedom!

Beginning Cash

+ Net Income (Income – Expenses)

-  Pay Yourself First (Your Own Bank)

Repay Debt

Purchases

Investments

====================

    Positive Cash Flow

= Ending Cash