This post Paying Yourself First Is the Key to Getting Rich appeared first on Daily Reckoning.

Robert Kiyosaki

Editor, Rich Dad Poor Dad Daily

Dear Reader,

I have two stories to share with you today.

They say that a picture is worth a thousand words. Study the diagrams below and see if you can pick up some of the distinctions between the two stories. If you're financially intelligent, you can see important distinctions in the diagrams.

Here is the first story:

Here is the second story:

The Power of Cash Flow

The first diagram depicts the actions of those who pay themselves first. Each month they allocate money to their asset column before they pay their monthly expenses.

The second diagram depicts the actions of those who pay everyone else before they pay themselves. Each month they allocate money to their expenses column and then invest with whatever is left over?which is usually nothing.

If you understand the power of cash flow, you will understand what is wrong with the second diagram. It's the reason why 90 percent of people work hard all their lives yet need government support like Social Security when they are no longer able to work. The reason is, they pay themselves last.

Cash flow means passive income and that means one thing to me: FREEDOM.

I'm free to do what I want, whether it's to have a life of leisure or pursue a new business adventure. I am free to be with people I choose. I'm free to set the schedule I want. My time is truly my time.

My number-one goal is to always have more cash flow coming in than is going out for my expenses. When I do that, I'm free. My assets work for me, instead of me working for money.

The Self-Discipline of The Rich

In order to be rich, you must have the self-discipline to pay yourself first. By this, I simply mean using your income to invest in cash-flowing assets before you pay your bills or buy anything fun. This in turn will create more income that you can use to invest in more, cash-flowing assets. Do that and you'll have more money than you know what to do with.

Paying yourself first is not easy. In fact, it can be scary, especially when the bills are piling up. But you must develop the self-discipline to do it.

Developing cash flow from the asset column seems easy in theory, but in practice it takes mental fortitude to direct money to the correct use. In today's world, it's much easier to simply blow money in the expense column than direct it into the asset column.

When you have no self-discipline, your money will flow through the path of least resistance. That is the cause for most people's financial struggles.

Simply put, those who have low self-esteem and low tolerance for financial pressure can never be rich. The world will push you around, not because people are bullies (though some of them are) but because it's natural for those with no or low internal control and discipline to be pushed around. People who lack self-discipline are often the victims of those who do have self-discipline.

The 3 Most Important Self-Discipline Skills

In the entrepreneur classes I teach, I constantly remind people not to focus on a product, service, or widget. Rather, I tell them to focus on developing management skills, and the three most important skills I tell them to focus on are:

1. Cash flow
2. People
3. Personal time

Whether you own a business or not, these are the three most important self-discipline skills you can master in life. It takes self-discipline to increase your cash flow by paying yourself first, to deal with people who want to take your money before you pay yourself and to negotiate deals, and to spend your personal time wisely by increasing your financial education and finding great deals and opportunities.

If you can master these three self-discipline skills, you can be rich.

Use Pressure to Grow Your Self-Discipline

Now, I can hear some of you objecting because you believe in paying your bills first. I am not saying don't pay your bills. All I'm saying is pay yourself first. Kim and I have been doing this for years and reaping the benefits. Were there times when we came up short and didn't have the money we needed to pay our bills? Yes.

When we occasionally came up short, we still paid ourselves first, however. The government and creditors would call and howl. I let them. Why? Because they do me a favor. They inspire me to go out and create more money.They grow my self-discipline through pressure.

So, I pay myself first, invest the money, and let the creditors yell. I generally pay them right away and have excellent credit. We just don't cave into the pressure of liquidating or spending our savings to pay consumer debt. That isn't the financially intelligent thing to do.

Instead, we grow our cash flow.

To successfully pay yourself first, keep the following in mind:

1. Don't get into large debt positions that you personally have to pay for. Keep your expenses low. Build up assets first. Then buy the big house or nice car. Being stuck in the Rat Race is not intelligent.
2. When you come up short, let the pressure build and don't dip into your savings or investments. Use the pressure to inspire your financial genius to come up with new ways of making more money and then pay your bills. You will have increased your financial intelligence and ability to make more money.

Buy Luxuries with Cash Flow

Money is a powerful force. Unfortunately, people use the power of money against themselves.

To be a master of money, you need to be financially intelligent. This starts with financial education and self-discipline, just like with my friend's son, and ends with knowing how to make money work for you, i.e., using assets to purchase liabilities.

Begin the path to making money work for you today, not the other way around.

Regards,

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post Paying Yourself First Is the Key to Getting Rich appeared first on Daily Reckoning.