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. Mil-
lions of copies have been sold. But while millions of peo-
ple freely repeat that powerful statement, few follow the
advice. As I said, financial literacy allows one to read num-
bers, 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 com-
pare the financial statements of people who pay them-
selves first against those who don't.
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 num-
bers and miss the story. If you can truly begin to under-
stand the power of cash flow, you will soon realize what
is wrong with the picture on the next page, or why 90 per-
cent of most people work hard all their lives and need gov-
ernment 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 sin-
cerely 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 pic-
ture of that action. Not the one that follows.
My wife and I have had many bookkeepers and ac-
countants 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 every-
one else first
There have been months in my life, when for whatever
reason, cash '1