As simple as this picture looks, as simple it is to create Wealth. But when I say ‘simple’ I do not mean ‘easy’. It still takes hard work. But if you use this ‘Map’ to influence all your daily financial decisions, then I can nearly go as far as to guarentee that you will create the freedom and wealth you deserve. You will learn to concentrate on those areas of your Map where you only need to do the work once, and reap the benefits over and over into the future.
- Your Sun (Business you own)
- Your Stars (Rental Properties, Royalties, E-books, Training Programs)
- Your Moon (Retirement Investments)
- Your Cloud (Income from all sources)
- Your Rain (Expenses)
- Yourself (and your family)
Bear with me for a while here: this a very important.
Every Business (and remember: you are a Business) has a Balance Sheet (BS) and an Income Statement (IS).
The Balance Sheet is like a snapshot taken of a Business at a particular time. Periodically a shapshot is taken and the BS lists all the Assets that it owns, and deduct all it’s Liabilities (what it owes others). The difference equals what the Business is worth (called it’s Net Worth).
Now you can do exactly the same for yourself using your Map. Everything that you own can be divided into your Sun, Moon and Stars.
From today, never forget that You are a Business (URaB)!
The Income Statement lists all the Income, less all the Expenses, for a particular period, normally a month or a year. The difference between Income and Expenses is called Profit.
As you can see from the image above, the Cloud and Rain represents your Personal Income Statement.
Your own Map
You can now draw your own Map on a piece op paper. Put the date at the top, and complete your Balance Sheet. Fill in what you own, less what you owe, in each of the catagories (Sun, Moon and Stars). We are not interested in detail here: approximate values are fine. Most people have nothing in their Sun and Stars. But don’t worry, we’ll soon change that for you. :)
Tip: Anything that increas in value over time, and produce an Income (or prevents and expense), is an Asset/Investment (Shares/stocks, bonds, Rental Property, your Home, etc.). Anything else is ‘Groceries’ (cars, boats, furniture, ect.).
Next fill in your Income and Expenses over the past year. If your Income exceeded your Expenses, then the ‘profit’ are invested back up into either the Sun, Stars or Moon. In later articles we are going to help you with this exciting choice.
Before we look at an example just this very important point:
Our definition of what constitutes and assets differs from that of the Accountants. Robert Kyosaki in his book Rich Dad Poor Dad has a similar definition.
“Anything that you buy that:
- increases in value
- over the Long Term, and
- provide some Income into your pocket,
is an Asset.
Anything that you buy that:
- deteriorates in value
- over the long- or short term, and
- continuously takes money out of your pocket, will be Rain (expenses).
It means that things like the following are Rain: Food, clothing, furniture, services like renting your home, school fees, motor vehicles. Yes: even motor vehicles – look at the definition above.
Although the home you live in (if you own it) does not provide an income, you are saving on rent for not having to stay in someone else’s house, so it still is an Asset. It also increases in value over time. Here I differ from Robert Kyosaki.
This is just a very short summary. To learn more, enter your name and email on the right for a weekly Newsletter in which the whole process is explained.
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