So now I have your attention and perhaps, commitment to go on this journey towards financial freedom and you’ve prepared your personal cash flow statement: have you?
Did you find a personal cash flow template you like online and do you now know what your current personal net cash flow is?
Even though over the years I knew I had to “save”, and I prepared monthly expenditure budget, it had always been with the goal of being able to cover my expenses (whatever they were at the time) as they fall due, so preparing my personal cash flow statement for the first time, with the objective of understanding my financial position, was an eye-opener!
What I found:
- Income: my only source of income is my salary from paid employment
- Expenditure: I was spending on necessities (utility bills and food) and unnecessary (and in some cases duplicated) luxuries e.g. it was bad enough that I was paying for a monthly Netflix subscription I hardly watched, but I also had a subscription for amazon prime, kindle unlimited, audible and also a subscription for limitless cinema attendance (which was barely utilised) – that’s about £50 per month/£600 per year!
- My net cash flow was positive, but I am pretty sure it could have been a lot better if I had been paying attention to what I was spending on and eliminated some of the unnecessary spend. But yay; it means I have some money I could be “saving”
The key, is what one does with that extra money and how well one keeps expenses down (in spite of increased income).
What did you find when you prepared your personal cash flow statement? I am interested to hear, so please share in the comments.
Today I want to talk about income sources – mine being salary from being an employee; guess what that means, if I don’t work I don’t get paid and of course, I only get paid in proportion to the amount of time I put. In other words, I am exchanging my time for money.
So one of the many things Robert Kiyosaki articulates very well in is the Cash flow Quadrant (I share below one of the many pictorial articulation of the cash flow quadrant I have come across)
Apart from being an employee like I am, other ways by which income can be generated are (as shown above) being:
- Self-employed: which still requires you to exchange your time for money, only that the time is spent in your own business. The reality however is that you put in all the hours (probably even more than as an employee) to make your business a success, and if you become incapacitated or need to take time out, the business either doesn’t open (or if you already have employees and it does open up, business operations are dependent on you so your absence is likely to impact continuity of the business).
- Business Owner: this involves you having built your own business in a manner in which systems and processes are in place and you have employees who, using your systems and processes, keep your business running. Your presence is not required for the business to be run, rather your systems are processes keep the business going. In effect, your source of income is from people using your system to run your business. Your time is free to do as you please.
- Investor: in this case, your money works for you in the sense that you invest your money and it generates returns which are sufficient to cover your expenses and whatever lifestyle you choose to live. Once again, your time is free to do as you please with.
If you are of African descent like me, your parents probably went on at you to make sure you study hard, go to University to become a professional (to the extent that if you were not a science student, you were deemed not to be serious) and just like them, I did the same with my kids (not specifically with whether they were science students or not, but encouraged them to complete a university degree). The realisation I have come to in recent times is that none of the things we get taught at school and university is applicable to navigating real life! Is it any wonder therefore that we have generations and generations of people who are not financially literate or who come to that literacy so late that they feel financial freedom can no longer be achieved.
I feel a bit like that as well actually, but I believe it is never too late to start so for the older generation like me, let’s go, we can do this! For the younger generation, best to start now so by the time you reach my age you are financially free and able to spend your time as you choose to.
Again, if you are of African descent like me, you grew up as part of a community and if you are in your 40’s/50’s you are of the generation whose parents believed ‘it takes a village to raise a kid’; which therefore means you are at the age where you are taking care of your parents and probably some of those who impacted/contributed to who you are and sending money back home for their upkeep, medical bills, etc. Do you think our children will do the same? If you are lucky and have children who are not self-absorbed as most millennials are, do you think they would be able to provide as much support as you do, given how much more difficult the world of today is?
In order not to find out the answer to these questions the hard way, we also need to prepare for the even later years (60’s/70’s), the pension, if you have one, is not going to stretch that far, in my opinion! So I say once again, it is not too late to start the journey to financial freedom, the biggest mistake/greatest disservice to oneself, would be not to start at all.
Financial freedom means different things to different people; to me it means being independent of employment income, having enough of a passive income stream that enables me to devote my time to the several causes I am passionate about and being able to spend more time with family; what does it mean to you? Interested to hear – share in the comment box.
📝 Originally shared under my first blog, bitalks; part of the journey that shaped Life’s Riches.
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