Comments on: Cash flow diagrams for the poor, the middle class, and the investor class http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html --- a combination of simple living, anticonsumerism, DIY ethics, self-reliance, and applied capitalism Fri, 25 May 2012 19:02:53 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Guest Post: ERE-Lite or, How I can easily live on £5000 per annum — Part I « The Palimpsest of Sawbones Surio http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-28041 Guest Post: ERE-Lite or, How I can easily live on £5000 per annum — Part I « The Palimpsest of Sawbones Surio Sat, 29 Oct 2011 07:52:08 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-28041 [...] (Ed’s Note: Kiyosaki readers will understand what that means, but for the rest, this article by Jacob gives a more detailed explanation and provide a context for the explanations that follows [...] [...] (Ed’s Note: Kiyosaki readers will understand what that means, but for the rest, this article by Jacob gives a more detailed explanation and provide a context for the explanations that follows [...]

]]> By: « Skuldfrihet? http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-24617 « Skuldfrihet? Sat, 06 Aug 2011 16:10:05 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-24617 [...] Jacob Lund Fisker har skrivit mycket roligt, men inlägget om kassaflöden tycker jag är särskilt bra och pedagogiskt. Att vara en nettomottagare av ränta är betydligt [...] [...] Jacob Lund Fisker har skrivit mycket roligt, men inlägget om kassaflöden tycker jag är särskilt bra och pedagogiskt. Att vara en nettomottagare av ränta är betydligt [...]

]]> By: John http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-24414 John Tue, 02 Aug 2011 00:50:06 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-24414 Hi Jacob Your diagrams are very easy to understand for most basic situations. I think you need to make a diagram that further explains "assets". I have borrowed money to acquire assets that generate money in excess of the interest that I pay. I am in debt but I make more money because I can borrow money at a very low cost. I then look for places that have a much higher return on investment that what the money cost to borrow. For example I borrowed money at 2% and bought stock that has a dividend of 6%, I net 4%, as long as the stock does not go down I make pretty good money. Hi Jacob

Your diagrams are very easy to understand for most basic situations. I think you need to make a diagram that further explains “assets”.

I have borrowed money to acquire assets that generate money in excess of the interest that I pay. I am in debt but I make more money because I can borrow money at a very low cost.

I then look for places that have a much higher return on investment that what the money cost to borrow.

For example I borrowed money at 2% and bought stock that has a dividend of 6%, I net 4%, as long as the stock does not go down I make pretty good money.

]]> By: Tim http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-23029 Tim Thu, 30 Jun 2011 04:46:26 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-23029 The diagrams are great. (I think everyone agrees on that!) I seem to straddle a couple of the examples. It does kind of hammer home to me how I need to be controlling personal expenditure more. I don't like that leakage to "other people"! The diagrams are great. (I think everyone agrees on that!)

I seem to straddle a couple of the examples. It does kind of hammer home to me how I need to be controlling personal expenditure more. I don’t like that leakage to “other people”!

]]> By: Rainbow Rivers http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-22997 Rainbow Rivers Tue, 28 Jun 2011 14:09:51 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-22997 Loved this post and loved the diagrams, I love charts and diagrams myself, it is an easy way to gage how your doing or explain points in simple terms where as a homeschooling parent I use things like these simple diagrams to teach my kids about financial management. We have a long ways to go but even on our poor income wages, I make sure I add monthly to build our assets.! I love coming here and reading all the informative posts, keep up the great work! Loved this post and loved the diagrams, I love charts and diagrams myself, it is an easy way to gage how your doing or explain points in simple terms where as a homeschooling parent I use things like these simple diagrams to teach my kids about financial management. We have a long ways to go but even on our poor income wages, I make sure I add monthly to build our assets.!

I love coming here and reading all the informative posts, keep up the great work!

]]> By: basilb http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-22976 basilb Mon, 27 Jun 2011 23:57:37 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-22976 Is this like the Feynman diagrams for ER ? :-) Is this like the Feynman diagrams for ER ? :-)

]]> By: Articles worth reading…….. | Moneymonk http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-17267 Articles worth reading…….. | Moneymonk Thu, 14 Oct 2010 21:14:41 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-17267 [...] Cash flow diagrams for the poor, the middle class, and the investor class [...] [...] Cash flow diagrams for the poor, the middle class, and the investor class [...]

]]> By: deegee http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-17231 deegee Wed, 13 Oct 2010 03:48:45 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-17231 I like your diagrams, too. But I would have added one which is a hybrid of the second and third diagrams because it is possible for someone to have debt yet have investments at the same time, just not enough of them to cover one's expenses. This was my situation for about 9 years until I became debt-free but was still working. Of course, my favorite diagram is the last one which I have been for the last 2 years. I like your diagrams, too.

But I would have added one which is a hybrid of the second and third diagrams because it is possible for someone to have debt yet have investments at the same time, just not enough of them to cover one’s expenses. This was my situation for about 9 years until I became debt-free but was still working.

Of course, my favorite diagram is the last one which I have been for the last 2 years.

]]> By: jc http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-17224 jc Tue, 12 Oct 2010 20:30:19 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-17224 this remains my favorite entry on this blog. The diagrams pretty much tell you all you need to know. this remains my favorite entry on this blog. The diagrams pretty much tell you all you need to know.

]]> By: larry macdonald http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-17216 larry macdonald Tue, 12 Oct 2010 16:24:47 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-17216 What I like about these flow diagrams is the elimination of interst payments. In Canada, the banking system is an oligopoly. This may give it the financial strength to survive fianncial crises, but the cost is a major transfer of wealth from Canadians. What I like about these flow diagrams is the elimination of interst payments. In Canada, the banking system is an oligopoly. This may give it the financial strength to survive fianncial crises, but the cost is a major transfer of wealth from Canadians.

]]> By: Jacob http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-12868 Jacob Tue, 22 Jun 2010 23:07:32 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-12868 @JL - I pretty much agree. I think consumerism and the "buy all the house you can" mentality is a contributing factor. After all, even if someone stepped in and got up to their neck in student loans, the loans can still be paid off if a nonconsumer lifestyle is adopted. Admittedly, though, it's pretty much a lost (semi)decade and if the major is chosen unwisely, there's really no increased earnings potential. @JL – I pretty much agree. I think consumerism and the “buy all the house you can” mentality is a contributing factor. After all, even if someone stepped in and got up to their neck in student loans, the loans can still be paid off if a nonconsumer lifestyle is adopted. Admittedly, though, it’s pretty much a lost (semi)decade and if the major is chosen unwisely, there’s really no increased earnings potential.

]]> By: JL http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-12867 JL Tue, 22 Jun 2010 23:02:34 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-12867 The PWTB in this country figured this out a long time ago, and thus have pushed consumerism onto the general public. But even that isn't enough to prevent smarter, young individuals from entering this plan. So the government in tandem with higher education and the student loan cartel conspired to put an entire generation into debt. They have succeeded. It is extremely difficult to become financially independent when one has student loan debt taking a hefty chunk out of your wages. The government further went on to make student loans non-dischargeable in bankruptcy. You can eliminate stuff to the bare minimum and still not make progress until your 30s or 40s if your debt load is high. The jobs are not there to pay off that debt load quickly. This was all designed intentionally. The tax system is in place also to further punish those that want to escape the wage cycle. Hence why I suggest people avoid paying for higher education or make sure the debt is very low. This means skipping graduate school, especially law school, but to a lesser extent medical school. The PWTB in this country figured this out a long time ago, and thus have pushed consumerism onto the general public.

But even that isn’t enough to prevent smarter, young individuals from entering this plan.

So the government in tandem with higher education and the student loan cartel conspired to put an entire generation into debt.

They have succeeded. It is extremely difficult to become financially independent when one has student loan debt taking a hefty chunk out of your wages. The government further went on to make student loans non-dischargeable in bankruptcy.

You can eliminate stuff to the bare minimum and still not make progress until your 30s or 40s if your debt load is high. The jobs are not there to pay off that debt load quickly. This was all designed intentionally. The tax system is in place also to further punish those that want to escape the wage cycle.

Hence why I suggest people avoid paying for higher education or make sure the debt is very low. This means skipping graduate school, especially law school, but to a lesser extent medical school.

]]> By: This is What Frugal Looks Like: Early Retirement Extreme — Almost Frugal http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-12520 This is What Frugal Looks Like: Early Retirement Extreme — Almost Frugal Sun, 13 Jun 2010 09:02:38 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-12520 [...] so I saved my money instead. At some point I realized that I could invest my savings and use the cash flow to cover my living expenses. It seemed like a fairly robust method: Work at an average paying job [...] [...] so I saved my money instead. At some point I realized that I could invest my savings and use the cash flow to cover my living expenses. It seemed like a fairly robust method: Work at an average paying job [...]

]]> By: SwedishMeatball http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-8806 SwedishMeatball Thu, 14 Jan 2010 02:19:47 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-8806 I haven't read all of your blog, so not sure if this is addressed elsewhere, but one weakness to this plan is that it's possible (I would say likely) that future inflation on essential services will outstrip dividends and investment performance in general. That is, price of food and gasoline will rise X%/year, investments+dividends will rise Y%/year, and perhaps X = (1.2)xY, for example. It depends on what you invest in, of course. I think it would be prudent to invest in some inflation-protected assets, esp those linked to commodities as opposed to real estate. TIPS might be ok. Gold and silver won't pay dividends but could be slowly sold, an ounce a year or something. Food inflation especially worries me. Food is historically cheap right now. What happens if it doubles or quadruples in price? (Due to peak oil / peak nat gas / peak fertilizer / peak water / bad weather, etc) I haven’t read all of your blog, so not sure if this is addressed elsewhere, but one weakness to this plan is that it’s possible (I would say likely) that future inflation on essential services will outstrip dividends and investment performance in general. That is, price of food and gasoline will rise X%/year, investments+dividends will rise Y%/year, and perhaps X = (1.2)xY, for example.
It depends on what you invest in, of course. I think it would be prudent to invest in some inflation-protected assets, esp those linked to commodities as opposed to real estate. TIPS might be ok. Gold and silver won’t pay dividends but could be slowly sold, an ounce a year or something.
Food inflation especially worries me. Food is historically cheap right now. What happens if it doubles or quadruples in price? (Due to peak oil / peak nat gas / peak fertilizer / peak water / bad weather, etc)

]]> By: Chessiq http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-5913 Chessiq Mon, 27 Jul 2009 05:01:54 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-5913 Very original. It has been a great day today... reading "The top 10 distinctions between millionaires and the middle class", and then coming over here to see your simple and effective explanation of cash flow for different types of people. I can see the poor, the middle class, and the rich in those diagrams ;-) You know somebody is deep when they are able to express complicated ideas in simple terms so that the man on the street can understand. Very original.

It has been a great day today… reading “The top 10 distinctions between millionaires and the middle class”, and then coming over here to see your simple and effective explanation of cash flow for different types of people. I can see the poor, the middle class, and the rich in those diagrams ;-)

You know somebody is deep when they are able to express complicated ideas in simple terms so that the man on the street can understand.

]]> By: Dipster http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-5526 Dipster Sat, 04 Jul 2009 12:24:38 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-5526 As you mention work is trading hours for dollars, and you only have so many hours. Thus if you can receive a small portion of many others dollars from work your income is theoretically limitless. This however puts workers into the asset class (slavery) and capitalists as slave owners. Your blog name is quite appropo as these ideas are not mainstream but certainly enable readers to see the information in a new way. Mainstream media has nothing new to say and no real insight so they use other tactics (film at 11, 10 best blah ..., etc) to get eyeballs on the same information in the same format. As you mention work is trading hours for dollars, and you only have so many hours. Thus if you can receive a small portion of many others dollars from work your income is theoretically limitless. This however puts workers into the asset class (slavery) and capitalists as slave owners.
Your blog name is quite appropo as these ideas are not mainstream but certainly enable readers to see the information in a new way. Mainstream media has nothing new to say and no real insight so they use other tactics (film at 11, 10 best blah …, etc) to get eyeballs on the same information in the same format.

]]> By: The Scrub http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-4363 The Scrub Fri, 20 Mar 2009 03:38:09 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-4363 The diagrams were pretty neat. It definitely puts the concept of "debt" in a sense that anyone can understand. The diagrams were pretty neat. It definitely puts the concept of “debt” in a sense that anyone can understand.

]]> By: AJC @ 7million7years http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-1012 AJC @ 7million7years Wed, 16 Apr 2008 21:44:22 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-1012 Love the diagrams! Somewhere here, we need to add that you also need a goal: 'frugalists' can live by (or close to) the assets-funding-their-stuff model simply by living cheap. Hobos, do it by abstaining, altogether - supplanted by a bit of scrounging, stealing, and/or begging as fits their personality. I live off the last diagram @ $250k+ p.a. ... it's different for everybody. I guess we need a way to 'know' when to hop off the second last diagram to the last ... Love the diagrams!

Somewhere here, we need to add that you also need a goal: ‘frugalists’ can live by (or close to) the assets-funding-their-stuff model simply by living cheap. Hobos, do it by abstaining, altogether – supplanted by a bit of scrounging, stealing, and/or begging as fits their personality. I live off the last diagram @ $250k+ p.a. … it’s different for everybody.

I guess we need a way to ‘know’ when to hop off the second last diagram to the last …

]]> By: Steve Austin http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-792 Steve Austin Tue, 18 Mar 2008 16:12:36 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-792 McDougal, what's a "real fortune", and how much is a windfall? McDougal, what’s a “real fortune”, and how much is a windfall?

]]> By: Mike McDougal http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html/comment-page-1#comment-788 Mike McDougal Tue, 18 Mar 2008 06:17:22 +0000 http://earlyretirementextreme.com/2008/01/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-788 "There are two kinds of people in this world - those who pay interest and those who make interest." That, of course, obscures the very real existence of people who do both. Few real fortunes were made without incurring debt or receiving a windfall. “There are two kinds of people in this world – those who pay interest and those who make interest.”

That, of course, obscures the very real existence of people who do both. Few real fortunes were made without incurring debt or receiving a windfall.

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