By: Robert Serina
It is your focus and goals that are the key to understanding the three basic cash flow patterns and how they interact with the three forms of income. A good understanding of this relationship is the solid core of financial education.
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These are how the three cash flow patterns interact with the three forms of income...
Poor
With the focus on earning enough money to cover your expenses you unwittingly become dependent on your earned income.
Once you are dependent on an earned income your goals naturally drift towards ways of increasing your earned income and ways of saving for retirement. This is especially true if you have no formal plan to follow.
As long as your focus is on increasing your earned income and paying your weekly expenses then your cash flow pattern will remain poor.
Middle Class
The middle class gets a handle on their expenses and begin to have a little extra money in their budget. If you control expenses and buy a house or a better car, you are flowing your cash to liabilities. You may also begin to put a little money aside in a portfolio for retirement.
Neither of these strategies will free you from having to work for an earned income. As long as you follow this cash flow pattern, you will remain in the middle class.
Wealthy
When financial independence becomes your main goal, many changes in your attitude and focus take place. You begin to invest time trying to figure out other ways to produce income besides working for it hourly.
When your knowledge and ability get to a certain point, you begin to convert earned income into assets in the form of passive and portfolio income. A goal here will be continuous improvement of your plan and your abilities. The focus should mainly be on increasing or producing sources of passive income.
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How Your Focus and Goals Determine Your Success.