Over the years, as I’ve travelled and talk to thousands upon thousands of people, I’ve often heard people say things like:
“I’m making more money than I ever have in my life, but I just can’t seem to get ahead.”
“It seems like every time I get a little money saved up, a big expense comes up that takes it all away.”
“I can’t seem to get out of my credit card debt even though I only use them for emergencies.”
These statements and more are the symptoms of someone who suffers from lack of financial control.
Feeling out of control?
People leave school not even knowing how to balance a checkbook, much less how to prepare a financial statement. So it’s no wonder they struggle financially. They never learn how to control their finances.
You can tell if people are in control of themselves by looking at their financial statements. Just because people have high-paying jobs, big houses, and nice cars does not necessarily mean they are in control financially.
Most people simply increase their standard of living with each pay increase. In the process they spend their income on expenses and liabilities without ever increasing their assets. The result is a continual feeling of being financially out of control—a feeling you can’t ever get ahead.
Take a look
If people knew how a financial statement worked, they would be more financially literate and more in control of their money. By understanding financial statements, people can better see how their cash is flowing.
For example, this is the cash-flow pattern of writing a check. When people write checks, they are depleting an asset.
And this is the cash-flow pattern of using credit cards:
When people use their credit cards, they are increasing their liabilities. In other words, credit cards make it so much easier to get deeper and deeper into debt. Most people can’t see it happening to them simply because they have not been trained to fill out and analyze a personal financial statement.
If you want to get control of your finances, the first step is to learn how to read and analyze your financial statement.
Take control today
Today, most individual’s financial statements look like this:
Unless something changes inside this person, chances are that this person will live a life of financial servitude. Why do I say that? Because each payment this person makes goes into the asset column of someone else to make that person richer.
When I’m asked, “What is the first step to financial freedom?” My response is, “Take control of your money and your financial statement.”
My wife Kim and I produced a program called How We Got Out of Bad Debt, where we walk you through the process of how we got out of bad debt, and how you can too.
More important, however, you will learn how to manage your money like the rich do. This is important because most people think that making more money will solve their money problems. In most instances, it does not. Learning how to manage the money you do have is how you solve your short-term money problems. And doing so gives you the opportunity to be financially free.