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nts　as　their　wages　increase；　hence　the　phrase　〃the　rat　race。〃　They　treat　their　home　as　their　primary　asset；　instead　on　investing　in　ineproducing　assets。

Why　the　Middle　Class　Struggle

Ine　goes　up；　Expenses　go　up
Assets　do　not　increase；　Liabilities　do　increase

This　pattern　of　treating　your　home　as　an　investment　and　the　philosophy　that　a　pay　raise　means　you　can　buy　a　larger　home　or　spend　more　is　the　foundation　of　today's　debtridden　society。　This　process　of　increased　spending　throws　families　into　greater　debt　and　into　more　financial　uncertainty；　even　though　they　may　be　advancing　in　their　jobs　and　receiving　pay　raises　on　a　regular　basis。　This　is　high　risk　living　caused　by　weak　financial　education。
The　massive　loss　of　jobs　in　the　1990sthe　downsizing　of　businesseshas　brought　to　light　how　shaky　the　middle　class　really　is　financially。　　Suddenly；　pany　pension　plans　are　being　replaced　by　401k　plans。　Social　Security　is　obviously　in　trouble　and　cannot　be　looked　at　as　a　source　for　retirement。　Panic　has　sei　in　for　the　middle　class。　The　good　thing　today　is　that　many　of　these　people　have　recognized　these　issues　and　have　begun　buying　mutual　funds。　This　increase　in　investing　is　largely　responsible　for　the　huge　rally　we　have　seen　in　the　stock　market。　Today；　there　are　more　and　more　mutual　funds　being　created　to　answer　the　demand　by　the　middle　class。
Mutual　funds　are　popular　because　they　represent　safety。　Average　mutual　fund　buyers　are　too　busy　working　to　pay　taxes　and　mortgages；　save　for　their　children's　college　and　pay　off　credit　cards。　　They　do　not　have　time　to　study　to　learn　how　to　invest；　so　they　rely　on　the　expertise　of　the　manager　of　a　mutual　fund。　Also；　because　the　mutual　fund　includes　many　different　types　of　investments；　they　feel　their　money　is　safer　because　ii　is　〃diversified。〃
This　group　of　educated　middle　class　subscribes　to　the　〃diversify〃　dogma　put　out　by　mutual　fund　brokers　and　financial　planners。　　Play　it　safe。　Avoid　risk。
The　real　tragedy　is　that　the　lack　of　early　financial　education　is　what　creates　the　risk　faced　by　average　middle　class　people。　The　reason　they　have　to　play　it　safe　is　because　their　financial　positions　are　tenuous　at　best。　　Their　balance　sheets　are　not　balanced。　They　are　loaded　with　liabilities；　with　no　real　assets　that　generate　ine。　Typically；　their　only　source　of　ine　is　their　paycheck。　Their　livelihood　bees　entirely　dependent　on　their　employer。
So　when　genuine　〃deals　of　a　lifetime〃　e　along；　those　same　people　cannot　take　advantage　of　the　opportunity。　They　must　play　it　safe；　simply　because　they　are　working　so　hard；　are　taxed　to　the　max；　and　are　loaded　with　debt。
As　I　said　at　the　start　of　this　section；　the　most　important　rule　is　to　know　the　difference　between　an　asset　and　a　liability。　　Once　you　understand　the　difference；　concentrate　your　efforts　on　only　buying　inegenerating　assets。　　That's　the　best　way　to　get　started　on　a　path　to　being　rich。　　Keep　doing　that；　and　your　asset　column　will　grow。　Focus　on　keeping　liabilities　and　expenses　down。　This　will　make　more　money　available　to　continue　pouring　into　the　asset　column。　Soon；　the　asset　base　will　be　so　deep　that　you　can　afford　to　look　at　more　speculative　investments。　　Investments　that　may　have　returns　of　100　percent　to　infinity。　Investments　that　for　5；000　are　soon　turned　into　1　million　or　more。　Investments　that　the　middle　class　calls　〃too　risky。〃　The　investment　is　not　risky。　　It's　the　lack　of　simple　financial　intelligence；　beginning　with　financial　literacy；　that　causes　the　individual　to　be　〃too　risky；〃
If　you　do　what　the　masses　do；　you　get　the　following　picture。

Ine　　Work　for　Owner
Expense　　Work　for　Government
Asset　　（none）
Liability　　Work　for　Bank

As　an　employee　who　is　also　a　homeowner；　your　working　efforts　are　generally　as　follows：
1。　You　work　for　someone　else。　　Most　people；　working　for　a　paycheck；　are　making　the　owner；　or　the　shareholders　richer。　Your　efforts　and　success　will　help　provide　for　the　owner's　success　and　retirement。
2。　You　work　for　the　government。　The　government　takes　its　share　from　your　paycheck　before　you　even　see　it。　　By　working　harder；　you　simply　increase　the　amount　of　taxes　taken　by　the　government　　most　people　work　from　January　to　May　just　for　the　government。
3。　You　work　for　the　bank。　After　taxes；　your　next　largest　expense　is　usually　your　mortgage　and　credit　card　debt。
The　problem　with　simply　working　harder　is　that　each　of　these　three　levels　takes　a　greater　share　of　your　increased　efforts。　You　need　to　learn　how　to　have　your　increased　efforts　benefit　you　and　your　family　directly。
Once　you　have　decided　to　concentrate　on　minding　your　own　business；　how　do　you　set　your　goals？　　For　most　people；　they　must　keep　their　profession　and　rely　on　their　wages　to　fund　their　acquisition　of　assets。
As　their　assets　grow；　how　do　they　measure　the　extent　of　their　success？　When　does　someone　realize　that　they　are　rich；　that　they　have　wealth？　As　well　as　having　my　own　definitions　for　assets　and　liabilities；　I　also　have　my　own　definition　for　wealth。　Actually　I　borrowed　it　from　a　man　named　Buckminster　Fuller。　　Some　call　him　a　quack；　and　others　call　him　a　living　genius。　　Years　ago　he　got　all　the　architects　buzzing　because　he　applied　for　a　patent　in　1961　for　something　called　a　geodesic　dome。　But　in　the　application；　Fuller　also　said　something　about　wealth。　　It　was　pretty　confusing　at　first；　but　after　reading　it　for　awhile；　it　began　to　make　some　sense：　Wealth　is　a　person's　ability　to　survive　so　many　number　of　days　forward。。。　or　if　I　stopped　working　today；　how　long　could　I　survive？
Unlike　net　worththe　difference　between　your　assets　and　liabilities；　which　is　often　filled　with　a　person's　expensive　junk　and　opinions　of　what　things　are　worththis　definition　creates　the　possibility　for　developing　a　truly　accurate　measurement。　　I　could　now　measure　and　really　know　where　I　was　in　terms　of　my　goal　to　bee　financially　independent。
Although　net　worth　often　includes　these　noncashproducing　assets；　like　stuff　you　bought　that　now　sits　in　your　garage；　wealth　measures　how　much　money　your　money　is　making　and；　therefore；　your　financial　survivability。
Wealth　is　the　measure　of　the　cash　flow　from　the　asset　column　pared　with　the　expense　column。
Let's　use　an　example。　Let's　say　I　have　cash　flow　from　my　asset　column　of　S〃J；000　a　month。　And　I　have　monthly　expenses　of　52；000。　What　is　my　wealth？
Let's　go　back　to　Buckminster　Fuller's　definition。　Using　his　definition；　how　many　days　forward　can　I　survive？　And　let's　assume　a　30day　month。　By　that　definition；　I　have　enough　cash　flow　for　half　a　month。
When　I　have　achieved　2；000　a　month　cash　flow　from　my　assets；　then　I　will　be　wealthy。
So　I　am　not　yet　rich；　but　I　am　wealthy。　　I　now　have　ine　generated　from　assets　each　month　that　fully　cover　my　monthly　expenses。　If　I　want　to　increase　my　expenses；　I　first　must　increase　my　cash　flow　from　assets　to　maintain　this　level　of　wealth。　Take　notice　that　it　is　at　this　point　that　I　no　longer　am　dependent　on　my　wages。　　I　have　focused　on　and　been　successful　in　building　an　asset　column　that　has　made　me　financially　independent。　　　If　I　quit　my　job　today；　I　would　be　able　to　cover　my　monthly　expenses　with　the　cash　flow　from　my　assets。
My　next　goal　would　be　to　have　the　excess　cash　flow　from　my　assets　reinvested　into　the　asset　column。　　The　more　money　that　goes　into　my　asset　column；　the　more　my　asset　column　grows。　The　more　my　assets　grow；　the　more　my　cash　flow　grows。　And　as　long　as　I　keep　my　expenses　less　than　the　cash　flow　from　these　assets；　I　will　grow　richer；　with　more　and　more　ine　from　sources　other　than　my　physical　labor。
As　this　reinvestment　process　continues；　I　am　well　on　my　way　to　being　rich。　　The　actual　definition　of　rich　is　in　the　eye　of　the　beholder。　You　can　never　be　too　rich。
Just　remember　this　simple　observation：　The　rich　buy　assets。　The　poor　only　have　expenses。　The　middle　class　buys　liabilities　they　think　are　assets。　So　how　do　I　start　minding　my　own　business？　What　is　the　answer？　Listen　to　the　founder　of　McDonald's。

CHAPTER　FOUR　
Lesson　Three：　Mind　Your　Own　Business

In　1974；　Ray　Kroc；　the　founder　of　McDonald's；　was　asked　to　speak　to　the　MBA　class　at　the　University　of　Texas　at　Austin。　A　dear　friend　of　mine；　Keith　Cunningham；　was　a　student　in　that　MBA　class。　After　a　powerful　and　inspiring　talk