Poh Heng

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Good Day and welcome back.  In this post, i shall be moving on to CD #3 of Adam Khoo’s Secrets of the Self-Made Millionaires - How the Rich Manage Cash Flow.

Note : This is the most tedious of the Program where you will need to dig out all your bank statements, stocks, loans, debts to create your own personal balance sheet.

This CD #3 is basically consists of 2 parts

Part 1 - Determine your current financial situation or how wealthy are you

Part 2 - The 4 levels of Wealth

Part 1

Determine your current financial situation or how wealthy are you

Adam starts by asking about your impression of a millionaire which often someone with leads a high life, spends lavishly etc.  However, this is not the way majority of the millionaires lived. In fact, according to Thomas Stanley, best selling author of The Millionaire Next Door (a book i am reading now and highly recommend), most of the 300 millionaires he interviewed in America lived well below their means and are extremely frugal.

Adam goes on to define the definition of wealth - which is how many years you can sustain your current lifestyle if you were to stop working now.  He then let you to do a lengthy exercise to determine your own wealth.  This exercise also makes you understand what are your assets and liabilities.

Next, he describes the cash flow of the middle class and the rich and of course we are more interested in the rich, ha.  The NUMBER ONE key of the cash flow of the rich is again (i have read this countless of times) PAY YOURSELF FIRST.  It is only by doing so that you can start to build up your cash flow (positively) for investing purposes. The common thing i see of most people is they tend to spend and save whatever is left (if any) - which is a killer mistake.  A habit which will rarely gets them wealthy.  Always force yourself to save at least 10% (increasing progressively) of your income and then spend the rest.

And back to the Program, you will then be asked to complete your Personal Balance Sheet which includes housing mortgage, car loans, short term and long term debts, insurance, income, assets like cash, stocks, loyalty, dividends etc.  A nice Excel spreadsheet (downloaded) will be provided for you to keep track of your finances.

I feel this exercise is an important first step for you to know where you are standing now i.e. your current status.  Even though i am always aware of my own assets and liabilities, i must admit that i have never have my own balance sheet before until this.  Now i have a much clearer picture of how “wealthy” i am and in better control of my cash flow.

Part 2

The 4 Levels of Wealth

The 4 levels of wealth are defined as follows

1. Financial Stability is when you have accumulated enough liquid assets to cover your living expenses for a minimum of between 3 or 6 months.
2. Financial Security is when you have reached a critical amount of positive cash flow assets that generate enough passive income to cover your most basic expenses
   
3. Financial Freedom is when you have accumulated a critical amount again of positive cash flow assets that generates enough passive income to sustain your current lifestyle
   
4. Financial Abundance is when you have created a amount of positive cash flow assets that generate enough passive income to sustain your desired dream lifestyle

This is a follow up exercise on your personal balance sheet where you will know which level are you in right now.  Next, you will be asked to write specifically what it takes to achieve each level and how you are going to attain them - through multiple streams of income and passive income.  You will get to learn them through the next 9 CDs of the Program Secrets of the Self-Made Millionaires.

This concludes CD #3 and we are ready for CD#4 Strategies To Massively Increase Your Income

Acquired wisdom “Wealth is not how much you earn, It’s how much you save and invest for compounded growth“