uise。
It is difficult to say which of the ten steps is the most important。 But of all the steps； this step is probably the most difficult to master if it is not already a part of your makeup。 I would venture to say that it is the lack of personal self…discipline that is the No。 1 delineating factor between the rich； the poor and the middle class。
Simply put； people who have low self…esteem and low tolerance for financial pressure can never； and I mean never； be rich。 As I have said； a lesson learned from my rich dad was that 〃the world will push you around。〃 The world pushes people around not because other people are bullies； but because the individual lacks internal control and discipline。 People who lack internal fortitude often become victims of those who have self…discipline。
In the entrepreneur classes I teach； I constantly remind people to not focus on their product； service or widget； but to focus on developing management skills。 The three most important management skills necessary to start your own business are：
1。 Management of cash flow。
2。 Management of people。
3。 Management of personal time。
I would say； the skills to manage these three apply to anything； not just entrepreneurs。 The three matter in the way you live your life as an individual； or as part of a family； a business； a charitable organization； a city or a nation。
Each of these skills is enhanced by the mastery of self discipline。 I do not take the saying 〃pay yourself first〃 lightly。
The Richest Man in Babylon； by George Classen； is where the statement 〃pay yourself first〃 comes from。 Millions of copies have been sold。 But while millions of people freely repeat that powerful statement； few follow the advice。 As I said； financial literacy allows one to read numbers； and numbers tell the story。 By looking at a person's income statement and balance sheet； I can readily see if people who spout the words 〃pay yourself first〃 actually practice what they preach。
A picture is worth a thousand words。 So let's again compare the financial statements of people who pay themselves first against someone who doesn't。
People who pay themselves first
＋＋
Job…》｜Income ｜
^ ｜… ｜
｜ ｜ Expense ｜ ｜
＋＋ ｜
＋《
…｜＋
｜ Assets ｜ Liabilities ｜
｜ ｜ ｜
｜_________｜____________｜
Someone who pays everyone else first… Often there is nothing left
＋＋
Job…》｜Income ｜
｜…
｜ Expense ｜ 》 Nothing left！
＋＋
…＋
｜ Assets ｜ Liabilities ｜
｜ ｜ ｜
｜_________｜____________｜
Study the diagrams and notice if you can pick up some distinctions。 Again； it has to do with understanding cash flow； which tells the story。 Most people look at the numbers and miss the story。 If you can truly begin to understand the power of cash flow； you will soon realize what is wrong with the picture on the next page； or why 90 percent of most people work hard all their lives and need government support like Social Security when they are no longer able to work。
Do you see it？ The diagram above reflects the actions of an individual who chooses to pay himself first。 Each month； they allocate money to their asset column before they pay their monthly expenses。 Although millions of people have read Classen's book and understand the words 〃pay yourself first；〃 in reality they pay themselves last。
Now I can hear the howls from those of you who sincerely believe in paying your bills first。 And I can hear all the 〃responsible〃 people who pay their bills on time。 I am not saying be irresponsible and not pay your bills。 All I am saying is do what the book says； which is 〃pay yourself first。〃 And the diagram above is the correct accounting picture of that action。 Not the one that follows。
My wife and I have had many bookkeepers and accountants and bankers who have had a major problem with this way of looking at 〃pay yourself first。〃 The reason is that these financial professionals actually do what the masses do； which is pay themselves last。 They pay everyone else first。
There have been months in my life； when for whatever reason； cash flow was far less than my bills。 I still paid myself first。 My accountant and bookkeeper screamed in panic。 〃They're going to come after you。 The IRS is going to put you in jail。〃 〃You're going to ruin your credit rating。〃 〃They'll cut off the electricity。〃 I still paid myself first。
〃Why？〃 you ask。 Because that's what the story The Richest Man In Babylon was all about。 The power of self…discipline and the power of internal fortitude。 〃Guts；〃 in less elegant terms。 As my rich dad taught me the first month I worked for him； most people allow the world to push them around。 A bill collector calls and you 〃pay or else。〃 So you pay and not pay yourself。 A sales clerk says； 〃Oh； just put it on your charge card。〃 Your real estate agent tells you to 〃go ahead…the government allows you a tax deduction on your home。〃 That is what the book is really about。 Having the guts to go against the tide and get rich。 You may not be weak； but when it comes to money； many people get wimpy。
I am not saying be irresponsible。 The reason I don't have high credit card debt； and doodad debt； is because I want to pay myself first。 The reason I minimize my income is because I don't want to pay it to the government。 That is why； for those of you who have watched the video The Secrets of the Rich； my income comes from my asset column； through a Nevada corporation。 If I work for money； the government takes it。
Although I pay my bills last； I am financially astute enough to not get into a tough financial situation。 I don't like consumer debt。 I actually have liabilities that are higher than 99 percent of the population； but I don't pay for them； other people pay for my liabilities。 They're called tenants。 So rule No。 1 in paying yourself first is don't get into debt in the first place。 Although I pay my bills last； I set it up to have only small unimportant bills； that I will have to pay。
Secondly； when I occasionally come up short； I still pay myself first。 I let the creditors and even the government scream。 I like it when they get tough。 Why？ Because those guys do me a favor。 They inspire me to i go out and create more money。 So I pay myself first； invest the money； and let the creditors yell。 I generally pay them right away anyway。 My wife and I have excellent credit。 We just don't cave into the pressure and spend our savings or liquidate stocks to pay for consumer debt。 That is not too financially intelligent。
So the answer is：
1。 Don't get into large debt positions that you 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 ability to make more money as well as your financial intelligence。 ； ： So many times I have gotten into financial hot water； and used my brain to create more income； while staunchly defending the assets in my asset column。 My bookkeeper has screamed and dived for cover； but I was like a good trooper defending the fort； Fort Assets。
Poor people have poor habits。 A common bad habit is innocently called 〃Dipping into savings。〃 The rich know that savings are only used to create more money； not to pay bills。
I know that sounds tough； but as I said； if you're not tough inside； the world will always push you around anyway。
If you do not like financial pressure； then find a formula that works for you。 A good one is to cut expenses； put your money in the bank； pay more than your fair share of income tax； buy safe mutual funds and take the vow of the average。 But this violates the 〃pay yourself first〃 rule。
The rule does not encourage self…sacrifice or financial abstinence。 It doesn't mean pay yourself first and starve。 Life was meant to be enjoyed。 If you call on your financial genius； you can have all the goodies of life； get rich and pay bills； without sacrificing the good life。 And that is financial intelligence。
6。 PAY YOUR BROKERS WELL： The power of good advice。 I often see people posting a sign in front of their house that says； 〃For Sale by Owner。〃 Or I see on TV today many people claiming to be 〃Discount Brokers。〃
My rich dad taught me to take the opposite tack。 He believed in paying professionals well； and I have adopted that policy also。 Today； I have expensive attorneys； accountants； real estate brokers and stockbrokers。 Why？ Because if； and I do mean if； the people are professionals； their services should make you money。 And the more money they make； the more money I make。
We live in the Information Age。 Information is priceless。 A good broker should provide you with information as well as take the time to educate you。 I have several brokers who are willing to do that for me。 Some taught me when I had little or no money； and I am still with them today。
What I pay a broker is tin