Blog | Personal Finance

Plan to Be Secure (PBS) System

Have you ever wondered if Rich Dad’s Pay Yourself First system really works? I’m here to tell you “Yes!”

Last month I introduced to you how my wife, Lisa, and I entered the world of Robert Kiyosaki and The Rich Dad Company.

I’m pretty sure you have a similar story. Maybe you were seeking information on personal finance and stumbled on richdad.com. Or maybe a friend told you about how Rich Dad Poor Dad influenced them to start their own business. Possibly you were invited over for game night and an eye opening round of CASHFLOW® the Boardgame.

As we discussed in my last post, for my wife and I it was receiving Robert and Kim’s educational CD’s, Choose to Be Rich, from my father.

After listening to those CD’s again and again, it became crystal clear just how much we had to learn about running a business.

Robert has used the B/I Triangle to help explain just how much is needed to run a successful business. The least important, he explains, is the product or service.

I can tell you with almost two decades of experience, he was right.

Learning the Hard Way

We knew we had some things going our way to make our dreams come true. We had a proven business idea, trusted advisors, and our own determination.

In addition, we knew we wanted to own, not lease, a property. But that was just the tip of the iceberg. We knew we needed to know how money worked. How much will we owe in taxes? How do we market our idea? What don’t we know about payroll? What type of legal entity do we need? How much should we plan on living off of? What else do we not know about the language of money?

We first looked at what we did have. Our “assets” amounted to just around $30,000 which was tied up in our house. And as we all know, that $30,000 in our house isn’t really an asset at all.

Shortly after making the decision to start our own rehabilitation centers I went to dinner with my dad. He was thrilled his gift had such an impact on our lives and was surprisingly supportive saying only, “Son, whatever I can do to support you, let me know okay?”

Cutting Ties

There’s a story that Hernan Cortes ordered his crew to burn their ships when they arrived on the shores of Mexico back in 1519. The reason being that in doing so he eliminated the option to admit a loss and head home. He would rather face the unknown than the temptation of retreat.

And so it was with us.

After my stint in rehab, I returned home to find Lisa had gotten rid of my liquor-branded mirrors, glassware, coasters, and shot glasses, you name it. My old life, as I (we) knew it, was definitely over. Things that had once been comforting to me, had now become reminders of how poisonous my life had become.

It was agreed upon that I would work full-time on our new endeavor while Lisa remained at the police department. Every bit of income was now coming from one source: Lisa’s salary. As if her already demanding hours weren’t enough she was also pregnant. Somehow she managed to work on the business with me on her days off. She was absolutely inspiring.

It didn’t take long for us to realize we were going broke. But like Cortes, there was no going back.

After crunching the numbers it looked like we wouldn’t be able to afford the down payment on the property for about 25 years. That sucked the wind right out of our sails.

Pay Yourself First

After we came face-to-face with the sobering realization that we were losing money so quickly we thought, “What would Robert do?”

We broke out the CD’s again and focused on these three things:

1. Divide to multiply
2. Work for free
3. Use other people’s money (OPM)

Just like Robert and Kim did when they were broke and building their businesses, we cashed each of Lisa’s paychecks and placed the money into each of those piles. The rest went to our bills.

After a while, we expanded our piles into the following accounts:

• Necessities (bills)
• Investing (buying assets)
• Reserve (savings)
• Donation (tithing)
• Fun
• Kids (future)
• Taxes

This system forced us to finally take control of our money. Every dollar earned was divided into percentages and placed into the appropriate account. We labeled this new account our Plan to Be Secure (PBS) System.

It took discipline, time and patience, but it did give us a foundation of security. By dividing our bank accounts, we were able to multiply the balances.

Are you paying yourself first to accomplish your dreams? If not, then who are you paying first, and more importantly, why?

If you would like to learn more about how we created our addiction treatment centers and the lessons that were learned along the way, check us out at WarriorsHeart.com. If you’re interested in learning more about social entrepreneurship, grab a copy of our book The Social Capitalist.