It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. –Robert Kiyosaki

Every dollar bill you have is capable of going to work for you…

If achieving financial independence following your bankruptcy is the goal, then creating the excess cash needed for savings and investment is the most important step toward that goal. It’s time to put the pedal to the metal and make some significant changes to your current cash flow situation.

Obviously if you want to build wealth and reach financial independence, you must do what so few do and live on less money than you make. There is no way around this simple rule.

You need to create as much excess cash as possible as quickly as possible.

Once you have a vision of exactly how you wish your life to be you want to get there as quickly as possible. You get to your vision quickly by creating excess cash to fund investment.

The more excess cash you create for investment, the faster you will become financially independent.

You create excess cash by reducing the cost of your monthly needs and by increasing your monthly income. Ideally you will do both, however of the two variables reducing expenses is more easily and more immediately accomplished.

This is where it can get very uncomfortable if your vision is not sufficiently defined. Your likelihood for success is low unless you can close your eyes and clearly envision the life you’ll have once you become financial independent.

When you reduce your monthly needs in support of a vision that lights your hair on fire, the decision to reduce a particular expense is simply a choice you are making that gets you one step closer to your vision.

However, if the vision you’ve created is a vague, undefined concept rolling around in your head, then the reductions in your budget will feel more like sacrifice. You want the reductions you make to be choices, not sacrifices.

Choices will propel you happily down the route to financial independence. Sacrifices will leave you feeling weary, making the route more difficult, if not impossible.

Before we can begin tinkering with your current budget we need to know how your money is currently being used. If you are already using a spending tracking tool, such as or Personal Capital, then you have a head start. will enable you to import data from your bank and automatically track and categorize your transactions. Also, it’s free, so use it.

If you are not currently tracking your monthly spending, you need to ascertain every cent you’ve spent during the last three months.  We want to categorize each transaction to determine exactly how your money flows in and out of your bank accounts. You need to start operating your personal financial life like a corporation, with you being the Chief Financial Officer.

If six weeks ago you spent $1.81 at Starbucks for a tall coffee you need to categorize it. It does not matter how small the transaction, everything over the last 90 days (minimum) needs to be categorized. This categorization is going to do two important things for you.

First, categorizing and tracking your expenses will tell you exactly where your money has been going. You’ve got to know what you are spending. Sun Tzu says to “know thy enemy,” and in your journey to financial independence cash outflow is your “enemy.”

Second, categorizing and tracking expenses gives you a starting point to track and measure progress. For example, if your expenses fall from $5,000.00 a month to $4,000.00 per month, you know you’ve made a 20% improvement.

What gets tracked can be improved.

If you always know how much you are spending on each category of expenditures, you can be sure you’re making consistent progress toward your goal of maximizing excess cash.

For every category of expenses you must ask yourself, “Does spending in this category take me closer or further away from my vision?”

If you are spending money on a car payment each month, is that particular car taking you closer to your vision? If not, then the expense must be reduced, or ideally eliminated altogether.

We will discuss ways to reduce particular categories of spending in the following post, but for now I simply want you to learn exactly where your money is going each month, and begin analyzing which spending categories support your vision and which do not. The categories that do not further propel you toward your vision must be reduced or eliminated.

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