Can I Really Afford This? That Question Itself Could Be Your Problem - Let's Fix It
How To Know With Absolute Certainty What You Can Afford And Still Stay In Position To Win The Wealth Game
How Do I Know For Sure What I Can Afford?
Webster Says…
Afford: to have sufficient financial resources or capacity to buy something without serious consequences.
With a vague definition like this, it’s no wonder more than 95% of the population aren’t achieving financial freedom.
You can’t win the wealth game with with no mathematical boundaries!
The ONE Number That Changes Everything
That one number is cash flow.
For our purposes, there are two types of cash flow
Active Cash Flow (derived from earned wages) &
Passive Cash Flow (derived from income producing assets)
Our journey usually starts with active cash flow whereby we invest/sell our time and skill (as we develop it) in exchange for money. This may be within someone else’s system as an employee or within your own system (self employed).
Our mission is to ultimately replace our active cash flow with passive cash flow.
We can do this by creating income producing assets (a business that operates without you) OR acquiring income producing assets (i.e. rental property, dividend stocks, etc.)
Three Mathematical Boundaries We Need To Understand & Agree Upon
Financial Freedom:
Financial Literacy
Affordability
Once again, the definitions we’ve been taught for these concepts are so vague that it’s no wonder so few of us stand any chance at all of winning the wealth game.
Well today we fix that by assigning mathematical definitions to each of these concepts!
Financial Freedom: When your passive cash flow is equal to or greater than your basic living expenses.
I like to explain this concept within the context of the Four Seasons of Wealth.
Survival: your passive income is less than your basic living expenses (aka: the rat race)
Stability: your passive income is equal to your basic living expenses (Tier 1 Financial Freedom)
Success: your passive income is equal to your basic living expenses AND your lifestyle expenses (Tier 2 Financial Freedom)
Significance: your passive income is equal to your basic living expenses AND your lifestyle expenses AND your legacy expenses (Tier 3 Financial Freedom)
Which season of wealth are you currently in and which season is your next target?
Financial Literacy: The skill developed to create or acquire income producing assets.
Now that we understand what “real” financial freedom is. It becomes blatantly clear that we need to develop our skill of creating or acquiring income producing assets. In other words, we need to improve our financial literacy.
Stay tuned for upcoming free livestreams and workshops
Affordability: We can afford anything that does not violate our self designated minimum cash flow floor or minimum cash reserves floor.
When we understand what “real” financial freedom looks like and we’re committed to improving our financial literacy - we can get a clear understanding of affordability.
CASE STUDY:
Brian and Cheryl are educators at a local middle school and are both in their late fifties. Their combined gross monthly income is $9,000. Brian is meticulous about tracking their monthly expenses so he knows that they average $8,100 per month (all in). They have $25,000 in savings and currently have no passive income at all.
What is Brian & Cheryl’s active cash flow?
Income - Expenses = Active Cash Flow
$9,000 - $8,100 = $900
As Rental Property Mastery (RPM) subscribers, Brian & Cheryl quickly realized that they were in the wealth season of survival and they would never achieve financial freedom (Tier 1) on their current path.
The Wealth Plan:
They decided right then and there to commit and get help with developing a plan to acquire income producing assets so they could achieve “real” financial freedom in a reasonable period of time. Their target season of wealth is “Stability or Tier 1 Financial Freedom.”
The plan is to divert their savings and net active cash flow toward the acquisition of rental property which meant they now were able to create the mathematical boundaries necessary to define what is affordable and what is not affordable for them.
Affordability For Brian & Cheryl
With their wealth plan in hand, Brian & Cheryl now know with certainty…
Anything that would cause their active cash flow to fall below $900 is not affordable for them &
Anything that caused their emergency cash reserves to fall below $5,000 is not affordable for them
The mathematical boundaries discussed here will help save Brian and Cheryl’s financial future and empower them to create generational wealth.
Are You Ready?
It’s Never Too Late To WIN Your Freedom🏆
That’s A Wrap: Help Us Help You!
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Cash flow, control, and becoming your own bank.