Financial Freedom Series: What Type of Money Manager Are You?
Welcome back to our Financial Freedom Series, where we’re looking into God’s Blueprint for Building Wealth and Managing Your Money Well!
We dive into biblical principles and cutting-edge money management wisdom to help you…
- Honor God with your money
- Build wealth
- Shrink your debt
- And build toward financial freedom
Last week, we looked at the importance of improving your CASH FLOW so that you can build your WEALTH FLOW. We examined the importance of having an INCOME STATEMENT and a BALANCE SHEET, as this can help you revolutionize your money management.
What is Your Income Statement?
An INCOME STATEMENT is a statement that clearly shows your INCOME and your EXPENSES.
INCOME refers to money that you EARN and causes money to FLOW IN.
EXPENSES refers to the money you SPEND and causes money to FLOW OUT.
Your income statement will show the FLOW of your CASH.
If you spend less than you earn, you will have a POSITIVE CASH FLOW.
If you spend more than you earn, you will have a NEGATIVE CASH FLOW.
Your INCOME brings wealth flowing IN.
Your EXPENSES cause wealth to flow OUT.
| YOUR INCOME STATEMENT… INCOME – EXPENSES = CASH FLOW |
What is Your Balance Sheet?
A BALANCE SHEET is a statement that clearly shows…
- Your ASSETS
- Your LIABILITIES
An ASSET refers to any ITEM OF VALUE that can be converted into cash – WHAT YOU OWN.
Your assets include…
- Cash in your bank savings
- Investments
- Property
- Personal items
Your assets have the potential to earn extra income through interest, dividends, and rental income, which will cause more money to flow back into your income statement.
A LIABILITY refers to any DEBT you have to re-pay, usually with interest – WHAT YOU OWE.
Your liabilities include…
- Loans
- Mortgage (home loan)
- Credit and store card debts
- Vehicle finance
Your liabilities will increase your expenses, causing more money to flow OUT of your income statement.
Your BALANCE SHEET will give you a good understanding of your NET WEALTH.
| YOUR BALANCE SHEET… ASSETS – LIABILITIES = WEALTH PORTFOLIO |
To create WEALTH, your ASSETS need to be greater than your LIABILITIES.
If you spend all you earn, you will NOT BUILD UP ASSETS.
If you have too much debt, all your income will go towards LIABILITIES.
| INCOME STATEMENT | BALANCE SHEET |
| INCOME: Use your hard-earned money wisely. Save and invest so that you can turn your income into assets. | ASSETS: Growing your assets will lead to building your wealth portfolio and will bring in more income. |
| EXPENSES: Cut wasteful expenditure and spend less than you earn. | LIABILITIES: You need to shrink your debts. |
Now, today, I want to ask you…
What Type Of Money Manager Are You?
Do you GO WITH THE FLOW, or do you have a PLAN?
Are you a SPENDER or a SAVER?
Are you creating DEBT or building WEALTH?
Are you BREAKING-EVEN even each month, just spending all you earn?
Are you SHORT each month, thereby needing to take on debt or max out the credit card to get by?
Can you spend less than you earn, thereby being able to TURN YOUR INCOME INTO ASSETS?
How you manage your money each month will affect your short-term stress or joy levels and shape your financial future. Will your current money management leave you broke or financially free in the future?
The simple day-to-day choices you make regarding how you manage your money often only show up in later years.
Are you setting yourself up for a brighter tomorrow, or is your current money management sabotaging your future goals and dreams?
The good news is that if you are prepared to change the way you manage your money, you can change your future destiny.
So, Which Type Of Money Manager Are You?
Over the next few weeks, I want to look at 4 types of money managers…
- BREAK-EVEN MONEY MANAGER
- THE SPENDER
- THE MIDDLE-CLASS MONEY MANAGER
- THE WEALTH BUILDER
Over the next few weeks, we will also show you how to improve your money management.
You can become a wealth builder and work towards financial freedom by making a few simple changes.
So today, let us unpack the 4 types of money managers…
Break-Even Money Manager
If you are a BREAK-EVEN MONEY MANAGER, you will SPEND ALL THE INCOME YOU EARN each month.
If your income increases, you spend more. You will live pay cheque to pay cheque.
If you are a break-even money manager, you may stay out of debt because you will only spend what you have available. Unfortunately, you will also never build up your assets if you spend all you earn each month.
The Spender
If you are a SPENDER, you will have an ever-increasing debt burden that will steal your cash flow and leave you feeling stressed out.
Spenders often spend all they make and borrow more to make ends meet.
Spending decisions are usually based on nothing more than whether you can afford the monthly repayments.
While spenders dream that one day things will change, the debt cycle keeps them in bondage. A spender will think that if they earn more, their problems will disappear, but this doesn’t happen; the more they earn, the more debt they take on.
Spenders refuse to understand that the problem is not their income but rather what they do with it.
If you manage your money like a spender, your liabilities will keep increasing, leaving you disillusioned and overwhelmed, with debt to your eyeballs. Unless you change your ways, your debt will eventually spiral out of control.
The Middle-Class Money Manager
The MIDDLE-CLASS MONEY MANAGER typically represents a large proportion of society.
If you manage your money like a middle-class money manager. In that case, a small amount of your income will flow into your assets each month, but unfortunately, most of your income will flow into your liabilities.
As income comes in, middle-class money managers will buy a lot of liabilities, thinking that they are buying assets (e.g., a new car). Unfortunately, the increase in debt causes cash flow to remain tight.
understand the need to save and invest, so they do have a few assets, including some sort of retirement plan, but they do not save enough due to unhealthy debt levels.
Middle-class money managers always seem to be just a little short each month.
If you manage your money like a middle-class money manager, you will have debt that mostly seems manageable but only a trickle of savings.
Unfortunately, middle-class managers are often left stressed out and cash-strapped when trouble hits.
The Wealth Builder
If you are a WEALTH BUILDER, you are disciplined with your money management. You live within your means. While you may have some debt, it is minimal and affordable.
A wealth builder will use a significant portion of their disposable income to buy assets, which results in more income over time.
Wealth builders plan well, setting savings aside and building their investments to help achieve future goals and dreams.
Wealth builders take a disciplined approach to money management. They think twice before spending, live within their means, deny short-term spending impulses, and practice delayed gratification, enabling them to stay out of debt and buy items for cash.
Wealth builders build healthy cash flow over time. By getting into a habit of saving before they spend, they build their wealth portfolio and are on the road toward financial freedom.
If you manage your money like a wealth builder, you may have a few debts (which usually will be a “good” debt, like property, that appreciates in value over time. Wealth builders keep their debt levels under control.
Most of their surplus income is used to invest, thereby building assets, which puts a wealth builder on the road towards financial freedom.
“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21:5)
In Summary…
- Your income brings money flowing in.
- Your expenses cause your money to flow out.
- To create wealth, you need to spend less on your expenses.
- By cutting down on your liabilities, you will improve your cash flow, and by reviewing your budget, you can cut back on non-essential income stealers.
- By investing part of your income, you can turn your income into assets, thereby building wealth.
- As you shrink your liabilities and build your assets, your wealth portfolio will grow. This, in turn, will generate extra income, thereby improving your cash flow and wealth flow.
“The wise man saves for the future, but the foolish man spends whatever he gets.” (Proverbs 21:20)
If you build margin into your budget and start investing your surplus income, you will BUILD WEALTH, which will SET YOU UP ON THE JOURNEY toward FINANCIAL FREEDOM.
I want to encourage you to…
- SAY NO TO DEBT
- LIVE WITHIN YOUR MEANS
- SPEND LESS THAN YOU EARN
- INVEST THE REST
So if you want to build wealth, you need to…
- Divert as much of your INCOME into ASSETS
- Reduce your EXPENSES and keep them as low as possible
- Reduce your LIABILITIES
- Continually increase your ASSETS
It is time to wipe out your debt!
It is time to break the debt cycle
It is time to build up assets and shrink your liabilities
It is your time to build towards financial freedom.
How Are You Managing Your Money?
Become a good money manager. It is your time to build towards financial freedom.
- YOU CAN TURN YOUR INCOME INTO ASSETS!
- YOU CAN BE A GOOD MONEY MANAGER
- YOU CAN BUILD WEALTH
- ABOVE ALL, DON’T FORGET JESUS
- MAKE JESUS THE CENTER, FOR HE IS YOUR SAVIOR AND WANTS TO WALK THE JOURNEY WITH YOU.
“I will guide you along the best pathway for your life. I will advise you and watch over you.” (Psalm 32:8)
Next week, we will examine THE BREAK-EVEN MONEY MANAGER and give you the solution to break the cycle and work towards financial freedom.
This is sooooooo rich