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Poor Texan Engineer
Rich Texan Engineer
The Rich Engineer | Poor Engineer |
| First
let me start with my education spill. What I am going to show you
uses the most basic accounting and finance foundamentals. I am
going to show you how to determine net income and exactly what a
balance sheet is and a liabilty statement. If you don't know what
these are, or want to learn more about these concepts in a simple, well
written format visit RichEngineer.com and follow that advice. If not continue reading to learn from the Poor Engineer.
The
Poor Engineer went to college, graduated and got a job in the oil
industry during an upswing in the market. Below is his montly income
and expense statement:
The
Poor Engineer's net income is $650 per month. Next lets review Poor
Engineer's balance sheet.
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where does the $650 a month net go? It clearly does not go into
assets that we can put on the Balance Sheet. Many of you have
probably asked yourself that same question: Where does all of my money
go? This expense statement only covers the every month purchases.
What is left out is the eating out for lunch everyday and then
doing the same for dinner. How about bar tabs, fixing up his car,
buying the latest and greatest gadget, shopping for new clothes?
That is where his money is goin. Basically Poor Engineer's
money passes right over the Balance sheet and into the liabilties
sheet. As
time goes on one of his assets would be his 401K, but that money cannot
be touched until 65 without stiff taxation. Lastly lets
review
Poor Engineer's Liabilities sheet:
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Fortunately
Poor Engineer had enough sense to avoid a mass of credit card debt.
Yet this was only by luck. Under the current situation if
something happened to Poor Engineer's job and he went a few months
without a paycheck he would have to get loans just to pay his bills,
but how many banks will give a person that is unemployed a loan?
Not too many.
This is what
happens to so many people out of college and pretty much for the rest
of their life. Some might buy a house and sell it a few years
later and kind of build their cash up, but just enough to pay off all
their debt. Basically going nowhere just like Poor Engineer.
Now learn what Rich Engineer does with his Engineering Job.
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