Financial Freedom Series: Let Go of the Middle-Class Money Mentality

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

Over the last month, 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.

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.

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.

We have looked at 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?

Are you able to spend less than you earn, thereby being able to TURN YOUR INCOME INTO ASSETS?

The way 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.

What Type of Money Manager Are You?

We have looked at 4 types of money managers…

• BREAK-EVEN MONEY MANAGER
• THE SPENDER
• THE MIDDLE-CLASS MONEY MANAGER
• THE WEALTH BUILDER

Today, I want to focus on the middle-class money manager and show you what you need to do to become a wealth builder…

The Middle-Class Money Manager

The MIDDLE-CLASS MONEY MANAGER typically represents a large proportion of society. 

Unfortunately, many follow the crowd and are cash-strapped and financially stressed out. 

If you manage your money like a middle-class money manager, a small portion of your income will go toward your assets each month, but unfortunately, most of it will go toward 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.

While middle-class managers understand the need to save and invest, the lure of credit robs them of attaining financial freedom. While they will build up a few assets that may include a retirement plan over their lifetime, they do not save enough due to unhealthy debt levels.

Middle-class money managers always seem to be short each month. 

The Middle-Class Money Manager:

Problem: 

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, when trouble hits, middle-class managers are often left stressed out and cash-strapped. 

If you are a MIDDLE-CLASS MONEY MANAGER, you will have an ever-increasing debt burden that will steal your cash flow and leave you feeling stressed out.

Solution: 

Change your money management. 

Form new habits.

Shrink your debts, as this will improve your cash flow.

Start investing part of your income. This will allow you to grow your wealth portfolio.

By investing part of your income each month, you can start converting your income into assets, thereby building towards financial freedom.

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21:5)

I Want to Encourage You to…

• WIPE OUT YOUR DEBT
• LIVE WITHIN YOUR MEANS
• SPEND LESS THAN YOU EARN 
• SAVE BEFORE YOU SPEND
• INVEST TO BUILD UP ASSETS

If Your Money Management is Not Working, then Be Prepared to Change…

• Reduce your EXPENSES and keep them as low as possible
• Shrink your DEBTS
• Divert as much of your INCOME into ASSETS
• Continually increase your ASSETS

You Can Become a Wealth Builder…

• YOU CAN BE A GOOD MONEY MANAGER
• YOU CAN TURN YOUR INCOME INTO ASSETS
• IT IS TIME TO BUILD TOWARD FINANCIAL FREEDOM

“The wise are cautious and avoid danger; fools plunge ahead with reckless confidence.” (Proverbs 14:16)