To plan my financial life property, I first need to figure out what are the cash flows I'm facing and how important (% and priority) each cash flow is.
The main positive cash flow (income) are :
- monthly : my salary. For most people, this would be your main positve cash flow. So, in Chapter 3, we will talk about whether you have invest most of your improvement on your main positive cash flow.
- case-by-case : your investment income. This can come from may forms, such as stock investment, rental income, or your own company. Later in this Chapter, we will also talk about how to think rich, i.e., Make this portion your main positive cash flow.
- annually : things such as tax refund (it is actually bad financial decision if you have tax refund), bonus, etc.
The main negative cash flow (payment) are :
- monthly : payment related to your house, including mortgage payment, utility bills, water & garbage, HOA fee, etc;
- monthly : payment related to your living, including food, cloth, and other supplies
- monthly and annually : budget for fun, which are things that you do not must have to survive, but it is really nice to have. Such as your weekly poke game or your summer vacation.
- monthly and case-by-case : money you put into investment. Note that we are saying "monthly and case-by-case", not "monthly or case-by-case", because, if you want to be rich, you need to make smart investment a habit, not an occational activity
- annually : all kinds of insurance (house, auto, health, etc.) and license (auto, etc) and tax (property tax, federal and state tax, etc) etc. that you pay annually.
Do you know whether you are cash positive (i.e. you have more income than spending) on monthly basis and on yearly basis ? Do you know how much percent of your negative cash flow goes to your food ? Unfortunately, most people simply have no idea.
Surprising (or not), rich people usually know this better than poor people (rich people track their cash flow more tightly). Rich people usually run their own financial life like they run their own company. In another word, they have their own balance sheet for their own financial life, just like for their own company.
If you want to be rich, you must think like rich people and act like rich people. Now it is time to open an Excel sheet and start to itemize your cash flow (homework).
