What Puts You into the
Middle Class Cash Flow Pattern?

The middle class cash flow pattern is where most people end up when they try to better their positions in life. It is like the poor cash flow pattern, with just a couple differences.

Eventually, people in the poor cash flow pattern get tired of their routine and begin to gain better understanding and control over their expenses. They have spent lots of time working for money, but none to educate themselves financially.

As a result, most people in this situation believe, in order to improve their situations financially, they need to focus even harder on their earned income. Enough time spent focused on working for money may produce extra income in the way of a raise or a promotion (but as you can see, that is a bad long term plan).

Pay careful attention to the word time and how it is being used in the example above.

Most people still have not spent any time to financially educate themselves, so they don't know what to do with the extra money. They don't have any ideas of their own about how to finance their own retirement, either. The extra money is usually used to buy a newer car, a bigger house, and anything left over is usually put into savings (at least in the beginning).

Eventually most are sold on the idea of putting the extra money into a portfolio for their retirement, usually consisting of mutual funds.

These purchases make life more comfortable, and so feel like assets...but they create an expense every month for a very long period of time. The misunderstanding is made worse by bankers who ask you to list your cars and home as assets against loans. By definition, these purchases are liabilities.

So the middle class work for money and, because they don't know what else to do, they flow their cash into long-term liabilities that improve their short term situations. The debt from these spending habits often become the very reason they cannot escape the slavery of working for money.

The middle class cash flow pattern has earned income flowing in, than back out to liabilities (which many THINK are assets). Left over income is used to fund a portfolio for retirement.

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