The 7 Levels of Investors – Part 2

Level I – Borrowers
Today we will look at Level 1 Investors from The Cashflow Quadrant™ by Robert Kiyosaki.

These people spend all they make and more. They solve financial problems by borrowing money. Their idea of financial planning is another credit card or refinancing.

Anything they own of value has debt attached to it. Level 1s are not only low income earners there are many high income earners that fall into this level.

Level 1 people use credit cards impulsively and generally do not know where their money disappears. They believe their problem is that they do not make enough money, however when their income does increase so does their spending. They fail to see their income is not the problem but rather their money habits. Money habits are always more important than the income you make in any given year.

In my early days as a financial planner, I was often shocked to meet with new clients who were top of their fields as Doctors, Dentists, Lawyers and other such professions earning very high incomes but were basically in debt. Sure they had expensive houses, flash cars and wore designer clothes so they did not look broke. They also had huge mortgages; cars were on finance and maxed out credit cards. One said to me once that “he wondered how he had become a person that enough was never enough!”

It was this type of behavior that was one of the contributing causes of the Global Financial Crisis. People borrowing insane amount of money they could not afford to pay back and now of course many all around the world are suffering. How was borrowing more than 100% to buy a house ever going to work? It was just a matter of time.

Since the GFC credit has become much more difficult to obtain so perhaps over time we will see the habits of Level 1 people transformed. (I am always an optimist :-)) I would love to hear your thoughts on this.