This is the cash-flow pattern of a poor person:
This is the cash-flow pattern of a person in the middle class:
This is the cash-flow pattern of a wealthy person:
All of these diagrams are obviously oversimplified. Everyone has living expenses, the need
for food, shelter, and clothing. The diagrams show the flow of cash through a poor, middle-
class, and wealthy person’s life. It is the cash flow that tells the story of how a person
handles their money.
The reason I started with the story of the richest men in America is to illustrate the flaw in
believing that money will solve all problems. That is why I cringe whenever I hear people
ask me how to get rich quicker, or where they should start. I often hear, “I’m in debt, so I
need to make more money.”
But more money will often not solve the problem. In fact, it may compound the problem.
Money often makes obvious our tragic human flaws, putting a spotlight on what we don’t
know. That is why, all too often, a person who comes into a sudden windfall of cash—let’s
say an inheritance, a pay raise, or lottery winnings—soon returns to the same financial mess,
if not worse, than the mess they were in before. Money only accentuates the cash-flow
pattern running in your head. If your pattern is to spend everything you get, most likely an
increase in cash will just result in an increase in spending. Thus, the saying, “A fool and his
money is one big party.”
I have said many times that we go to school to gain scholastic and professional skills, both
of which are important. We learn to make money with our professional skills. In the 1960s
when I was in high school, if someone did well academically, people assumed this bright
student would go on to be a medical doctor because it was the profession with the promise
of the greatest financial reward.
Today, doctors face financial challenges I wouldn’t wish on my worst enemy: insurance
companies taking control of the business, managed health care, government intervention, and
malpractice suits. Today, kids want to be famous athletes, movie stars, rock stars, beauty
queens, or CEOs because that is where the fame, money, and prestige are. That is the reason
it is so hard to motivate kids in school today. They know that professional success is no
longer solely linked to academic success, as it once was.
Because students leave school without financial skills, millions of educated people pursue
their profession successfully, but later find themselves struggling financially. They work
harder but don’t get ahead. What is missing from their education is not how to make money,
but how to manage money. It’s called financial aptitude—what you do with the money once
you make it, how to keep people from taking it from you, how to keep it longer, and how to
make that money work hard for you. Most people don’t understand why they struggle
financially because they don’t understand cash flow. A person can be highly educated,
professionally successful, and financially illiterate. These people often work harder than
they need to because they learned how to work hard, but not how to have their money work
hard for them.
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