Your Personal P&L
Financial IntelligenceMeet Alex. He Looks Rich, But He Can’t Sleep.
Imagine a guy named Alex. Alex drives a shiny luxury SUV. He wears a watch that cost more than your first car. He lives in a postal code that makes people say, “Wow.”
Alex earns $150,000 a year. That is a huge amount of money (Revenue). By all accounts, Alex is winning.
But at 2:00 AM, Alex is staring at the ceiling, sweating. Why? Because after the car payments, the mortgage, the dining out, and the credit card bills, Alex has $0 left. Actually, he has less than zero. He is technically losing money every month.
The Tale of Two Wallets
Comparing Alex (High Earner) vs. Sarah (Smart Saver). Who is actually richer?
Alex makes more, but keeps nothing. Sarah makes less, but builds wealth.
You Are a Business. Act Like One.
If a coffee shop sold $1 million in coffee (Revenue) but spent $1.1 million on beans and rent (Expenses), it would go bankrupt. It doesn’t matter how busy the line is. Most households run exactly like this failing coffee shop. They focus on the salary (Revenue) and ignore the profit (Net Income).
The Personal P&L Statement
How money flows through a “Solvent” life.
Salary, Bonuses, Side Hustles (This is Vanity)
Taxes, Rent, Food, “Fun”, Debt Payments
This is what you actually keep. (This is Sanity)
The “Silent Killers” of Wealth
Where does the money go for the average person?
The Rat Race Trap
This chart shows the most common financial mistake. As people get older and earn more money (the Blue Line), they immediately upgrade their lifestyle (the Pink Line).
They get a raise, so they buy a better car. They get a bonus, so they book a luxury trip.
Notice the gap between the lines? There isn’t one.
Because Expenses rise exactly as fast as Income, they never build wealth. They are running faster just to stay in the same place. This is the definition of the “Rat Race.”
Creating the “Wealth Wedge”
This is what a healthy business—and a wealthy household—looks like.
You continue to grow your income (Revenue). But, you intentionally keep your lifestyle costs flat (Expenses). You drive the reliable car for a few more years. You cook at home.
That green area opening up in the middle? That is your profit. That is your cash flow.
You use that cash flow to buy assets (things that pay you), which creates even more income. This is how you escape the race.
The Wealth Building Model
Widening the gap between what you make and what you spend.