Video Transcript: The Key To Financial Freedom

Welcome back. This is Alex Barron with financial freedom and Success Institute. We're going to continue here with the financial freedom seminar. 

Now we're going to discuss a lesson on how to manage your cash flow. It's very important to manage your cash flow, because your cash flow is what's going to determine a lot of your success with money. So first of all, let's talk about where does all the money go? I didn't realize that most people here in America make at least a million dollars during their working life. Even if they make minimum wage. 

The question is, how much of that money do they get to keep? Where does it all go? A lot of it goes to the IRS thought of it goes to banks and the way of interest, right? Some of it goes to insurance companies, the way of premium some of it goes to merchants, through all the things that you purchase, a lot of it is going to go to your car and to your rent, how much of it is going to go into your own pocket? That's the question. 

Now let's focus in a little bit on the topic of taxes. None of us probably likes taxes. Right? Peter Daniels once said, there's three things that are sure in life. One is that you're going to be criticized the other day is that you're gonna die. And the last is that you're not going to get away from it, you're gonna have to pay taxes. So what kind of taxes do people have to pay? Well, there's a lot of taxes. Robert Kiyosaki once said, you're taxed when you earn your tax when you spend, you're taxed when you save, and you're taxed when you die. 

Here in the United States, we have the income tax, we have which is a tax on your income, we have a Social Security tax, which is also a tax on your income up to a certain limit. We have a sales tax every time you buy something, we have a property tax, we have an inheritance tax. And we have many other types of taxes. I like what Abraham Lincoln once said, he said, you can't make people the poor, rich, by making the rich for one time they tried to trick Jesus into saying that he was against taxes. 

But what did Jesus say? He said, Give to Caesar what is Caesar's, and give to God that which has gone, right. So taxes are not a bad thing, because the government uses taxes to basically take care of overall needs that everybody has, for example, roads, education, public defense, things like that. However, I would argue that in some ways, progressive taxing is pretty unjust. Why? Because it's essentially reflecting a type of discrimination against people who want to prosper and do better. 

If you think about the socialist ideal that everybody shouldn't be the same. What ends up happening when you take away the incentive from people who make money by taxing them too much. And when you basically give away money to people who don't work, what ends up happening is simply that the people who work hard, don't have that incentive to keep working hard. And the people who don't work don't have the incentive to work, right. So at the end of the day, socialism, all it does is it brings more inequality, because it makes everybody equally poor. That's the only thing you can do. 

Now, when we think about how the tax system works, for people who don't have a business of their own, that seems pretty unfair, they make money, the government takes away their taxes, and they get to live and spend on what's left over.

The benefit of having a corporation is that it's the other way around, you make money, then you get to spend it and make it deductible, and then you pay taxes on the profits, right? So if you're able to start your own business, it's really to your advantage to do so. 

Now, let me ask you, if you had a million dollars, what would you do with it? Some people say well, I would invest. Some people say now that they know how to pay the benefits of paying their debts out to pay to pay my debts. Some people might choose to go traveling, some people might choose to start a business. Right? There's a chapter in this book, which we've discussed, the richest man in Babylon. That's called the Seven cures for Lean first, I really encourage you if you have the time to buy this book to go through it. 

We're gonna focus right now on a couple of these points here. One of these King Sentences it says here, what do you desire the most the gratification of the desires of each day? Which are things that are quickly gone and forgotten, or do you require what you put first substantial belongings gold land herds, merchandise income bringing investments. 

It's talking says here, the coins you take from the purse, bring the first the coins and leave within it bring the ladder. So let's kind of discuss what it's talking about. Basically, if we go here to the board, imagine that you have a purse. And this story. There's a lot of guys who had an empty purse, right? Why? Because everything that they earn is money that's soon gone. But as we've discussed originally, if you make 10 coins, right? Make sure if you have an empty first, what should you do? You shouldn't spend more than 9, right? Because if you spend more than 9, what's going to be left? Nothing. But if you spent nine or less, now your purse is not going to be empty. Just the next time around, you make another 10. And you pull another 9, what's left? Now you've got to write. If you think about it in a different set of terms, the points you take out is for current short term. Expenses.Right? 

What we have to think about Warren, is not how do we spend more money? It's not how to be a consumer, which is what traditionally economics tells people they should do as being a consumer No, what we need to focus on is how to become a better one. A better producer, right? How to not make 10 but instead how to make what 11,12 20, right how to make more. And we also need to focus on becoming a better one saver unless we learn how to save how to pay ourselves. 

First, we will never experience and I say never experienced financial freedom. We have to learn how to become a better producer, how to consume less, and how to save more. Why? When you save more, you have more options. Right? This is where the cash flow comes in. These things are for the long term. These are short term things you save or for the long term. Right? What are some of the things that you can do with the cash flow that you get to keep? Well let's think about it. 

One of the things you can do is buy protection like we were saying in the last lesson what you're on if you haven't seen this lesson, I encourage you to go to the financial security seminar on how to become your own bank and study that strategy. What else can you do? You can pay down debt. Right. 

What other options do you have when you become a saver? Well, you can have build up a reserve it's always good to have reserves. The reserves can be in the way of cash can even be in the way of coins like gold coins. Or just build your savings account. 

What else can you do? You can invest you can start a business  So as you see, there's lots of things that savings enables you to do. That the only way you're gonna have those options available to you is if you basically stop spending 100% of your money, you have to keep some here that are going to be available to you for the long term. Okay, let's go back here. 

So let's talk about short term needs and wants versus long term. A lot of it has to do with our understanding what they're thinking with our mindset. And some of the things that we're going to talk about here may seem strange to you, and of course, about finances, but they're very important. I think you'll understand why here in a minute. 

The first one, let's talk about our short term wants versus our long term goals. One of the quickest and easiest ways for young people to basically ruin their lives permanently to destroy their lives financially, is to do what is to start having sex at a young age. This can lead to a number of unwanted problems, for example, not just sexually transmitted diseases, which are terrible, but also maybe to an unplanned pregnancy, it could lead some people to make a terrible choice of abortion, which, as Christians, we don't support. Right? Young people may become irresponsible, the man could become irresponsible, and maybe the women end up having the baby all by themselves. 

Wouldn't it be better to think long term and instead, instead of having sex at a young age, wait till you find your perfect marriage partners, and plan on having a family when it's the right time after you finished your education. So this is why we bring this up. If you want to ruin your life financially, go ahead and start having sex at a young age. If you want to have a better financial future, think long term. And think in terms of having a lifelong committed marriage. 

Let's talk about a different subject. When young people want to leave the house as soon as the Attorney What is it that they want to do, they want to have their own independence, and they want to go out and rent the apartment, ideally, the fanciest apartment that money can buy. But wasn't it better to think long term and instead focus on having a home of your dreams, something that you can establish where you're not just throwing away your money in rent? 

Let's talk about another subject, entertainment. We all like to have fun. I have nothing against her attainment. But yet a lot of people where do they spend all their money? When they're thinking short term? They're just thinking about where am I going to go party? What am I going to drink? What movie am I going to see this weekend? Right? Let me call my friends and find out where they're going. 

Wouldn't it be better instead, to plan to visit some maybe exotic destination, go on a great vacation, open up your world learn something? We can't do that. Unless we're thinking long term. If we're consistently spending all of our money short term, it's just not going to be there for us. 

Think about a car, how many people as soon as they get a job, the first thing they do is they go spend all their money in a brand new car? Wouldn't it be better instead to think longer term and say, You know what, I'm just going to purchase a car that can get me to and from my work. I'm gonna make sure I pay it with cash. Why? So I can save longer term to accomplish all of my longer term dreams. 

A lot of people, they're so impulsive that they go spend everything that they seem when they go to the shopping mall, and they buy with a credit card. Right? It can be anything from the food days, to the clothes or shoes that they find. Wouldn't it be better instead to learn how to live debt free and instead of paying two or three times what you bought was while you're paying for all that interest, instead, live debt free, you don't have that stress and you have more money to spend on yourself. 

Other people that can't wait to leave their house to go study in an expensive University and they take on student loans. Wouldn't it be better to instead think long term and say you know what, I'm gonna learn the exact same thing at all these universities. I'm going to find one that I can afford. Where basically I'm focused on my dictation instead of getting into debt. 

Lastly, we have a lot of people who think short term was say, You know what, I'm going to save money, I'm not going to buy that car insurance or that health insurance. Well, how much more do they lose? By not having that insurance when something bad happens, it's better to think long term, right? And have the adequate protection. So what we see here is different examples of people who think short term versus long term where that short term thinking really gets you into trouble and cost you a lot more money down the road. 

So why is it that people make these choices, oftentimes, it has to do with what's going on in their heart and in their mind, as well as their thought process their mindset, a lot of all of us want to experience love, and appreciation, right? Their basic human needs. But that doesn't mean that you need to go and find that in another person when you're young. Instead, you need to learn how to feel loved by God and by your family, and especially by yourself, and not seek those things. But stay focused on your long term goals. 

A lot of people want things when yesterday or right now, right, they'd rather not wait for the long term. But as we taught you earlier in this course, it's good to have dreams, it's good to have goals that are going to last a lifetime. Instead of buying things on impulse without thinking, think long term plan ahead. Instead of trying to impress your friends, based on what you have the latest trends, planning to work on developing some virtues like as discipline, and patience. Instead of waiting, you know, being impatient to instead develop the habit of saving. Instead of having a weak and immature ego, why not work on developing a stronger ego and focus, you know, rather than being impulsive, and not understanding money, take the time to invest in your financial education and learn how money works, because in the long run, it's only going to benefit. 

Now, some words of advice on controlling your expenses. We know it's one thing to earn the money. But it's another thing to keep the money, right. And part of what you have to do is you have to watch your pocket, there's a lot of people who may not necessarily want to come pull the money out of your wallet directly. But they're going to appeal to your emotions, they're going to appeal to a weaker side of you that if you're not careful, you're going to end up spending money on wisely. 

For example, I'm all for giving. And I'm going to share with you a section on giving. I think it's very good to give but a lot of people are very unwise in who they give money to. They give money to churches, charities or nonprofits that don't bear good fruit. So all that money basically goes to waste, it's not going towards serving God or doing something positive for people, it's going into somebody's pocket that isn't exactly doing good things with that money. There's not much we can do about what we pay the government, we have to pay our taxes. But we can certainly hire a good tax attorney, or a tax accountant who can help us minimize what we pay. 

We've already talked about basically trying to cut off the dependency of banks out of our life, and minimize the interest ideally, to zero that we spend on banks. We need to be wise in what we spend on merchants, right? Because not everything that shines is or is glitter gold. And we need to be more wise about the kind of investments and loans that we make, we're going to have a section on that coming soon. So that you can be careful about not losing your money on that. What seems attractive, but ended up being bad investment opportunities. 

So if we look again, at the cash flow statement, the cash flow statement basically reads like this. Every month, you're going to start off with a beginning amount of cash. Then you're going to add what you say to which is your net income. And from that you're going to have choices, you're going to be able to put some money into paying yourself first by becoming your own bank. Again, I refer you to those sets of videos. 

Financial security, how to become your own banker. You can use some of it towards paying down debt. You can use some of it towards purchases like your home your car, can you can use some of it towards your investment in your business. Right. Whatever you don't use any of these categories is simply going to cause your cash to go up.  That's Are your reserves.

We already showed you earlier, the key to success is not just to save a little, which is good. But it's to save more. And ideally to save a lot. You can save more, either by spending less, or by earning more, right, it's a combination of the two. At the end of the day, good cash flow management comes down to understanding the consequences of what you do with your money, short term and long term. It also has to do with the options of what you do with the money. Once you keep it, make sure you always have a cash reserve at all times, don't leave, let your bank accounts run close to zero. Because if you're worried constantly about bouncing, check or paying extra fees, that's not going to really help you make sure you have a healthy reserve. And make sure you always try to forecast at least 30 days in advance, maybe sometimes up to 90 days in advance when money's gonna come in. And when money's gonna have to go out. 

Let me give you a few words of advice here on buying a home, buying a home or a car is a good thing. But paying interest to buy those things is not a very good thing. So let's talk about this in more detail. What makes a good purchase or a good investment when it comes to a car or a home. One of the things is that owning is always going to be better than renting, soon to be better than leasing. So if possible, don't rent or lease unless you are only going to be using that for a very short period of time. When you buy a home, make sure you put down at least 20 to 25% down that way you'll save on having to pay what's called PMI, which is Private Mortgage Insurance. 

Make sure that each month you pay extra on that mortgage as we showed you in the section on paying down paying off your debts quickly. If you only make the minimum payments, you're gonna end up spending a ton of time and two or three times as much money. Due to that interest payment. Make sure that you find a place to live that's close to your job. Otherwise, you might end up spending a lot of time and money commuting to your job and a lot of gasoline. Right? Try to find a car that you can pay off within two years. Otherwise, you may end up having to pay more, make sure you have a car that works so that you don't spend a lot of money on an old car that's constantly breaking down. 

Look around for opportunities to save on interest. If you're still in debt, sometimes there's credit card offers are something that offers a 0% down for 12 months, trying to take advantage of those opportunities, just make sure that you pay them off. So all of these things are good ideas in terms of being able to make better use of your money. So just to recap, cash flow management is key to financial freedom. And one of the things that you have to focus on is keeping track of how much money you have at the beginning of the month. And where you hope to end up at the end of the month. This is a function of what you save what you do with the savings part of it to go to your own bank. Part of it to go to repay down debt, part of it to go to the purchases that you've made. And part of it is going to go to the investments that you make.