most families； the financial story is a story of working hard in an effort to get ahead。 Not because they don't make money。 But because they spend their lives buying liabilities instead of assets。
For instance； this is the cash flow pattern of a poor person； or a young person still at home：
Job （provides ine）》 Expenses（Taxes Food Rent Clothes Fun Transportation）
Asset （none）
Liability （none）
This is the cash flow pattern of a person in the middle class：
Job （provides ine）》 Expenses（Taxes Food Mortgage Clothes Fun Transportation）
Asset （none）
Liability （Mortgage Consumer loans Credit Cards）
This is the cash flow pattern of a wealthy person：
Assets（stocks bonds notes real estate intellectual property）》ine （dividends interest rental ine royalties）
Liabilities （none）
All of these diagrams were 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 or wealthy person's life。 It is the cash flow that tells the story。 It is the story of how a person handles their money； what they do after they get the money in their hand。
The reason I started with the story of the richest men in America is to illustrate the flaw in the thinking of so many people。 The flaw is that money will solve all problems。 That is why I cringe whenever 1 hear people ask me how to get rich quicker。 Or where do they start？ I often hear； 〃I'm in debt so I need lo make more money。〃
But more money will often not solve the problem； in fact； it may actually accelerate the problem。 Money often makes obvious our tragic human flaws。 Money often puts a spotlight on what we do not know。 That is why； all too often； a person who es into a sudden windfall of cashlet's say an inheritance； a pay raise or lottery winningssoon returns to the same financial mess； if not worse than the mess they were in before they received the money。 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 skills and professional skills； both important。 We learn to make money with our professional skills。 In the 1960s； when I was in high school； if someone did well in school academically； almost immediately people assumed this bright student would go on to be a medical doctor。 Often no one asked the child if they wanted to be a doctor。 It was assumed。 It was the profession with the promise of the greatest financial reward。
Today； doctors are facing financial challenges I would not wish on my worst enemy； insurance panies taking control of the business； managed health care； government intervention； and malpractice suits； to name a few。 Today； kids want to be basketball stars； golfers like Tiger Woods； puter nerds； movie stare； rock stars； beauty queens； or traders on Wall Street。 Simply because that is where the fame； money and prestige is。 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 spend moneywhat to do after you make it。 It's called financial aptitudewhat you do with the money once you make it； how to keep people from taking it from you； how long you keep it； and how hard that money works for you。 Most people cannot tell 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 for them。
The story of bow the quest for a Financial Dream turns into a financial nightmare。 The movingpicture show of hardworking people has a set pattern。 Recently married； the happy； highly educated young couple move in together； in one of their cramped rented apartments。 Immediately； they realize that they are saving money because two can live as cheaply as
one。
The problem is； the apartment is cramped。 They decide to save money to buy their dream home so they can have kids。 They now have two ines； and they begin to focus on their careers。
Their ines begin to increase。
As their ines go up。。。their expenses go up as well。
The No。 1 expense for most people is taxes。 Many people think it's ine tax； but for most Americans their highest tax is Social Security。 As an employee； it appears as if the Social Security tax bined with the Medicare tax rate is roughly 7。5 percent； but it's really 15 percent since the employer must match the Social Security amount。 In essence； it is money the employer cannot pay you。 On top of that； you still have to pay ine tax on the amount deducted from your wages for Social Security tax； ine you never receive because it went directly to Social Security through withholding。 Then； their liabilities go up。
This is best demonstrated by going back to the young couple。 As a result of their ines going up； they decide to go out and buy the house of their dreams。 Once in their house； they have a new tax； called property tax。 Then； they buy a new car； new furniture and new appliances to match ＇heir new house。 Ail of a sudden； they wake up and their liabilities column is full of mortgage debt and creditcard debt。
They're now trapped in the rat race。 A child es along。 They work harder。 The process repeats itself。 More money and higher taxes； also called bracket creep； A credit card es in the mail。 They use it。 It maxes out。 A loan pany calls and says their greatest 〃asset；〃 their home； has appreciated in value。 The pany offers a 〃bill consolidation〃 loan； because their credit is so good； and tells them the intelligent thing to do is clear off the highinterest consumer debt by paying off their credit card。 And besides； interest on their home is a tax deduction。 They go for it； and pay off those highinterest credit cards。 They breathe a sigh of relief。 Their credit cards are paid off。 They've now folded their consumer debt into their home mortgage。 Their payments go down because they extend their debt over 30 years。 It is the smart thing to do。
Their neighbor calls to invite them to go shoppingthe Memorial Day sale is on。 A chance to save some money。 They say to themselves； 〃I won't buy anything。 I'll just go look。〃 But just in case they find something； they tuck that clean credit card inside their wallet。
I run into this young couple all the time。 Their names change； but their financial dilemma is the same。 They e to one of my talks to hear what I have to say。 They ask me； 〃Can you tell us how to make more money？〃 Their spending habits have caused them to seek more ine。
They don't even know that the trouble is really how they choose to spend the money they do have； and that is the real cause of their financial struggle。 It is caused by financial illiteracy and not understanding the difference between an asset and a liability。
More money seldom solves someone's money problems。 Intelligence solves problems； There is a saying a friend of mine says over and over to people in debt。
〃If you find you have dug yourself into a hole。。。 stop digging。〃
As a child； my dad often told us that the Japanese were aware of three powers； 〃The power of the sword； the jewel and the mirror。〃
The sword symbolizes the power of weapons。 America has spent trillions of dollars on weapons and； because of this； is the supreme military presence in the world。
The jewel symbolizes the power of money。 There is some degree of truth to the saying； 〃Remember the golden rule。 He who has the gold makes the rules。〃
The mirror symbolizes the power of selfknowledge。 This selfknowledge； according to Japanese legend； was the most treasured of the three。
The poor and middle class all loo often allow the power of money to control them。 By simply getting up and working harder； failing to ask themselves if what they do makes sense； they shoot themselves in the foot as they leave for work every morning。 By not fully understanding nioney； the vast majority of people allow the awesome power of money to control them。 The power of money is used against them。
If they used the power of the mirror； they would have asked themselves； 〃Does this make sense？〃 All too often； instead of trusting their inner wisdom； that genius inside of them； most people go along with the crowd。 They do things because everybody else does it。 They conform rather than question。 Often； they mindlessly repeat what they have been told。 Ideas such as 〃diversify〃 or 〃your home is an asset。〃 〃Your home is your biggest investment。〃 〃You get a tax break for going into greater debt。〃 〃Get a safe job。〃 〃Don't make mistakes。〃 〃Don't take risks。〃
It is said that the fear of public speaking is a fear greater than death for most people。 According to psychiatrists； the fear of public speaking is caused by the fear of ostracism； the fear of standing out； the fear of criticism； the fear of ridicule； the fear of being an outcast。 The fear of being different prevents most people from seeking new ways to solve their problems。
That is why my educated dad said the Japanese valued the power of the mirror the most； for it is only when we as humans look into the mirror do we find truth。 And the main reason that most people say 〃Play it safe1' is out of fear。 That goes for anything； be it sports； relationships； career； money。
It is that same fear； the fear of ostracism that causes people to conform and not question monly accepted opinions or popular trends。 〃Your home is an asset。〃 〃Get a bill consolidation loan and get out of debt。〃 〃Work harder。〃 〃It's a promotion。〃 〃Someday I'll be a vice president。〃 〃Save money。〃 〃When ！ get a raise； I'll buy us a bigger house。〃 〃Mutual funds are safe。〃 〃Tickle Me Elmo dolls are out of stock； but I just happen to have one in back that an