Most people's money is controlled by banks and government through taxes, loans, and payments. The speaker explains why tracking money flow and budgeting beyond monthly expenses matters for building wealth and taking control of your finances.
My goal in this video is to get you thinking about what is actually happening around you to help give you a new perspective on building wealth. And as I've already explained in previous videos, the government and banks have created the the way most people run their household and manage their cash flow. You live off of what you earn and try to stay within the warning lights of your income when it comes to supporting your month to month needs. And when you run a little short on cash, you turn to banks to supply your cash needs. In other words, you live on what you make and borrow here and there as needed for cars, vacations and home improvements. To make it all work. We rely on banks to support our lifestyle. And by doing this, we are transferring our wealth to these financial institutions. So what we're going to do here is shine light on what's actually happening and and identify how much money is flowing into your control and how much money is flowing out of your control. You see, many people have a belief that they're actually in control of 100% of their money, when in fact your cash flow, debt structures and tax returns, they likely show a very different story. You may have control over a portion of your money, but banks and the government are often in control of a larger portion. Now I know I talk a lot about banks and the government, but hear me the there's a reason for this and I'm trying to help you see it. Let me give you an example of what I'm talking about. Let's assume that you're making $100,000 a year. @ that income level, you're probably at a 20% federal tax rate, give or take. And if you are in the state of Missouri, which is where I'm at, there's a 6% state tax and so that puts you at about 26%. So we see the government has taken control over 26% of your income. The average person making about $100,000 a year probably has a mortgage payment somewhere in the neighborhood of $2,500 a month. Well, that's another 30% of your money flowing to a bank. And if you add a $400 a month car payment, that puts another 5% on top of that. And so you're at 35%. And if you include your taxes and what you're paying to the bank, that's 61% of the money you're earning that's flowing away from you and out of your control. And if you're someone contributing to government savings plans, that could be another five. That's flowing out of your control and into account that you cannot touch until you're nearly 60 years old. So if you add the taxes, the banks, the government, everything, you're up to over 70%, leaving 30% in your control. Remember that everything that has to do with money revolves around mindset and having control. And if you're truly trying to build wealth and keeping control of your financial life to create enough passive income to be able to retire, then it's important to begin thinking differently and challenging the status quo. It all starts with tracking money movement. We have to be tracking our money and have a spending plan in order to gain control over it. There are many software programs out there, such as Quicken or Mint, that you can use to track expenses and monitor your cash flow. To get there, it's helpful if you break your spending down into three different categories to begin to departmentalize your money needs. The first is where most people operate and that is the area of reoccurring expenses. This would include such things as a house payment, utilities, the things that you likely know off the top of your head, since they are the most frequently paid expenses. Then you have those irregular expenses. These are the things that pop up throughout the year. Personal property taxes are often an example, maybe an association due real estate taxes and things like that. So you, you have your regular expenses and you have your irregular expenses. And now you have what's left, which is normally used as discretionary or simply left to sit in a bank account somewhere. People will often call this their savings, but they really have no defined plan around the money. Now this is where you have an opportunity to begin shifting things into your control. When you take your budgeting process a step further and think beyond your current situation to identify very significant, specifically your spending goals over the next 36 to 48 months, you begin to see a bigger picture. The reality is that you will have car purchases, perhaps home improvements, educational expenses, all these different types of things. You know this is in your future and it's essential to identify and map them out. It's important to identify how much money you will need and when you will need it. Because if these things are not mapped out, then you'll end up relying on banks to subsidize your lifestyle. Look, I know many people boast about monthly budgets, but the truth is they really don't work. There are too many variables to a month to month budget that prevents them from being an effective tool for building wealth. They may help you get by month to month, but if you're taking time to watch this video, then I know you want more for yourself than just getting by. Looking at a bigger picture gives a better sense for what is actually happening and can then be converted to a monthly structure to help manage things on an ongoing basis. The bottom line is this money is either flowing towards you or away from you.
