Money Smart Skill: Patience
I got a very late start with my financial education but I have been working hard to catch up. My favorite mentor is Robert Kiyosaki of RichDadPoorDad fame. Kiyosaki created a board game called cashflow to help teach people his financial strategies. In the game you draw a card that has a profession on it and you get a list of expenses and your cash flow monthly. The goal is to escape the rat race board and graduate to the fast track.
After playing the rich dad financial education game, cashflow, many times I have found the way to consistently get out of the rat race in less than 2 hours. I always draw the doctor card even if I am not trying to. I think God is wanting to make a point. The doctor card is one of the most challenging cards because it carries the highest cash flow monthly.
Right, I said the highest income. It also carries the highest monthly expenses and the object of the game is to get your passive cash flow monthly higher than your expenses. You might think a big monthly paycheck would be the ticket to building passive income but that is not necessarily the case. Passive income is money that comes through businesses, rental income or other investments. In the rich dad financial education game, cashflow, you must build up a portfolio of investments until your passive cash flow monthly exceeds expenses.
In the cashflow game you have expenses that are fixed and you have debt that you can pay off to lower your monthly expenses. Like the game I have fixed expenses such as malpractice and liability insurance, home insurance, license and association membership fees as well as mandatory continuing education. In the game you have fixed child expenses and they are higher for the doctor card. I have 4 legged children and they have significant expenses associated with them that are not negotiable.
When I first started playing cashflow I was so frustrated to see other players, who drew the truck driver or mechanic card, breeze out of the rat race once they got the hang of the game. Despite all my money making efforts I was always the last to make it. This cost me a few sleepless nights.
So what is the secret I finally discovered about getting out of the rat race? Patience! This has not been an easy lesson for me. When I first played the game I tried to save my money so I could invest in some big deals. This never worked. Then I tried to borrow money to make big deals. This did not work either. I resisted the reality of my situation and was sure I could make one big deal and change my financial situation quickly.
Finally I resigned myself to being the last one in the game to get out of the rat race and low and behold I started having success. I learned to follow a boring plan of paying off as many of my high expenses as possible. While other players were able to invest and buy real estate I did best when I stayed with my plan. Get a paycheck, pay down debt was my life for 75% of the game. My action oriented temperament fought against this strategy but I persisted.
As my expenses went down I began to have a little extra to invest if I was careful. When I stopped trying so hard to get ahead and focused instead on the basic principles of paying down debt and investing in good deals when they presented themselves I made headway.
The cashflow game has been such a powerful learning experience for me. Based on my experience playing the game, when I decided to make my move to Fischer I took on my high expenses with open eyes. I knew I would be challenged but I also understood that I could work smarter to lower my debt and build my passive income at the same time, SLOWLY.
The path I have taken in not what is recommended in most financial education books. I did not start saving when I was 20 and I don’t have a big retirement account. I chose to live above my means and continue to work smart to get my means up to speed. I avoid consumer debt but sometimes I have to use short term credit which I pay off as quickly as possible. I understand that high, non fixed interest payments on credit cards make it very hard to get ahead financially.
Even though I got a late start with my financial education, I do have some savings and I am continuing to add to my passive income from several businesses. I love being a veterinarian and an entrepreneur. I am looking forward to having even more time to spend with my animals but I am not wanting to retire early.
Some months or even years are tight and I don’t get to do all the improvements I want to on my property but I know I am on the right path. I am learning to be patient and let time work for me as my debt gets steadily lower and my cash flow monthly gets higher. I am so glad to have the financial education to understand about money and have a plan and watch it unfold over time. Every day I am more appreciative of the gifts God has given me. Like patience. Madalyn
Did you get started late? Not sure how to get your cash flow monthly up? I would love to have a conversation. Contact me.
Photo credit: flickr via creative commons
Money Smart Skill: Where does your money go?
I am retiring another checkbook cover. I opened this business account in 1986 and I have written over 13,000 checks on it. Even at averaging a modest $200 per check, a lot of money has passed through this account. Where did all that money go? Knowing where your money goes is an important money smart skill.
I went into business with a very poor financial education. Most of my cash flow monthly went to paying bills. I was not introduced to the Kiyosaki, RichDad financial education program until I read his first book in 2000. After a brief period of total shock at how little I understood about finances, I set about figuring out what was happening to my money.
In the year 2000, despite having a thriving veterinary practice, I had no assets. Kiyosaki stressed the importance of looking at profit and loss statements to determine where your money is going. When I started tracking my money it was clear that paying interest on consumer loans was where much of my money went. What a shock to find that a simple thing like not planning for consumer purchases was keeping me broke. Tracking my money was a money smart skill I had to develop if I wanted to change my future.
According to Kiyosaki, it is not only important to determine where your money actually goes but also to plan for where you want it to go. The Kiyosaki, RichDad education program teaches you how to invest in assets that will pay you and then you can use that money to buy things you want. This way you keep your original money or principle intact. What an amazing concept.
Tracking your money, budgeting your money and investing your money are all critical in controlling where your money goes. If you don’t take control of your money it will take control of you. Madalyn
Three money smart actions:
1. Reduce bad debt – consumer loans, loans with variable rate interest
2. Increase cash flow monthly – increase income or reduce expenses
3. Invest in assets – investments which bring in positive cash flow monthly
Photo credit: Flickr via creative commons
Spend Now to Pay Debt, Borrow Later … and Other Recession Economy Lessons
Guest Post by Stephanie Yeh
Doing the right thing is always a good thing, but not necessarily an easy task, especially in this recession economy. Turn on the news and you are likely to end up depressed. Ignore the news and you might miss an important newsflash that could affect your financial future.
So what’s a person to do?
Two Basic Money Smart Principles
I’ve learned quite a bit reading the Go Cash Flow Now blog by veterinarian Dr. Madalyn Ward, and that’s why I’m writing this guest post. I want to share some of the money smart lessons I have learned from this blog. Hopefully these lessons will help other people as well, since making the right financial decisions can be terminally confusing. I have learned a lot from this blog, and here are just two basic principles that have really played a big role in my financial security in this recession economy.
Money Smart Lesson #1: Pay Off Debt ASAP
One of most important and counter-intuitive lessons I have learned from this blog is this: pay off debt now, even if that means borrowing again later. This important lesson comes from playing Robert Kiyosaki’s Cash Flow game. The goal of the game is to get out of the rat race, where you trade your time for money rather than having passive income sources like rental income. In the game, you play a character, like a plumber or a doctor. Being a veterinarian, Madalyn frequently picks the doctor card because it matches her lifestyle of high income AND high expenses.
What is really interesting is that when Madalyn pays off debt every chance she gets, starting with the high-interest credit cards, she gets out of the rat race faster than if she waits to accumulate enough cash to pay off the whole debt. Even if she has to borrow money from the bank later, she still gets out the rat race sooner. I have done this and I feel so much better. I really sleep better at night … even knowing that I might have to borrow again in the future.
Money Smart Lesson #2: Save Money but Stay Sane
While belt-tightening is definitely a big money smart strategy, I have learned from this blog that you still have to spend money occasionally so that you can stay sane. If you over-tighten your spending so that your quality of life is low, you won’t feel positive about your life or your money situation.
Madalyn and I are both horse-crazy, and we both have spending weaknesses in this area: Madalyn likes to buy high quality tack and I collect horses, especially mustangs. Whenever we feel like splurging we call each other and prevent each other from over-spending.
For instance, if I spot a gigantic jumper-perfect mustang that I want to go adopt, NOW, Madalyn talks me out of it and helps me spend a lot less to maximize my experience with my two current horses. I spend a little bit to stay sane, but don’t saddle myself with the expense of taking on a new horse.
We are always looking for others who want to inspire each other to spend wisely on horses and other hobbies. Want to play?
Recession Economy: Inflation is a hidden tax
This recession economy has been with us for much longer than most similar periods in the past. Words like deflation and inflation are thrown around but few actually understand the implications each of these has on our lives. Our understanding is complicated by the fact that we can have one or the other in different sectors of the economy.
At this time we have deflation in the housing market, but inflation in the cost of energy, consumer goods and health care. Our interest rates are still at record lows but starting to rise. The challenge with deflation is that businesses have such low profit margins that they can’t afford to expand and hire new employees. At some point, continued deflation in prices will put many companies completely out of business. Increased energy costs also drive up the cost of raw goods further eroding profits.
The federal reserve is attempting to combat deflation by keeping interest rates low to encourage people to borrow more money and spend it. They are also printing massive quantities of dollars in an attempt and create controlled inflation to shift us out of the recession economy. The problem with both of these strategies is that interest rates will eventually have to come up and, controlled or not, inflation eventually lowers the value of the dollar.
To summarize:
Deflation of the dollar increases its purchasing power but too much can slow down expansion of the economy and jobs
Inflation decreases the purchasing power of the dollar but supposedly helps with growth and expansion in our economy( I don’t believe this)
This is where the hidden tax concern shows up. The government can take a portion of your income in the form of a obvious tax or they can use printed money from the federal reserve to sell as bonds which lowers the value of the dollars you have. In other words, the government gets the printed money before it goes into circulation and loses value. For more on this concept check out The dollar is not money.
The fact that we are printing money to lower the value of the dollar is not lost on the foreign nations we have loans with. They have no desire to be paid back with dollars that are worth less than what they were when the loan was made. Based on our actions, future loans will come with much higher interest rates, if they come at all.
What we can do to protect ourselves from manipulation of our currency during the recession economy:
Elect officials to all levels of government who will be fiscally responsible and curb spending
If you foresee a need in the next year for a product, make that purchase now to support our businesses
Do not spend money on non necessities
Do sell stuff now that you do not need
Do not hold savings in the bank in the form of dollars
Do hold your savings in products that have real value such as real estate or precious metals, such as silver
If you invest in the stock market, focus on commodities that people must have for survival, such as energy and food
Pay off all debt that does not have a fixed, low interest rate
Educate yourself on economic and financial issues
Do not depend on elected officials or proclaimed financial advisors unless you see positive results from their actions
Do look into starting a home based business that will give you additional cash flow
I make these recommendations based on my research but you should do your own study to determine what is best for you. I have a good books section of my blog that can help you get started. I believe our recession economy will right itself based not on government action but the actions of each of us as individuals. I believe the American people will get it right and lead the rest of the world back to prosperity. Madalyn
Check out this video on the Fed Printing Money
Check out our free e book
Photo credit: Flickr via creative commons
