Archive for the ‘General’ Category

Affordable Sources Of Passive Income!

Tuesday, January 9th, 2007
I learned from Rich Dad series that an asset is one that generates positive cash flow. If it does not generate income, then it is a liability. For example, a car is liability if it does not generate positive cash flow. If I rent out a car and it earns a monthly rental income, I will need to do a simple calculation to determine whether it is an asset or liability. Basically, I need to subtract the car loan monthly repayment and maintenance costs from monthly rental income. If the result is positive, then it means that the car generates a positive cash flow and thus it is classified as an asset. If the result is negative, then it means that means the car generates a negative cash flow and thus it classified as a liability.
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With this new definition of what is an asset, I understand that if I want to build up my wealth, I must investment only in assets that can generate positive cash. But do I just simply invest in any assets that generate me positive cash flow?
For example, if I were to invest in a business that is generating positive cash flow and this business take up all my time, is this consider a good investment? Since my time would be totally taken up, I would not have the time to think of building other sources of income. Thus, I do not think that this is a good investment.
But what if I were to invest in a business that generates positive cash flow but required minimum involvement on my part? If that is the case, then I will considerably free to pursue the building of other sources of income. My conclusion is that I should be selective towards investing in any positive cash flow assets. But I still have doubts regarding my conclusion.
When I learned from the Rich Dad series that I should be focus on building passive income, my doubts are removed. That means I should be investing in assets that generate positive cash flow as a passive income. What is considered a passive income? The way I have understood about passive income is that even if I were to do little or nothing for a long time, the cash will still come to me continuously.
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For example, if I were to invest in a piece of real estate that generate a positive cash flow by renting it out, then the work that I need to do per month will be like ensuring that my rental income is collected promptly. Maybe I can even automate this part by debiting the rental income from the lessee’s bank account and crediting it into my bank account directly. Then, the only work that I need to do is to ensure that my rental income is credited into my bank account monthly.
The opposite of passive income is active income. Active income means that I have to keep working to ensure that the cash keeps coming in. The moment that I stop working, the cash also stop coming in. A job is an example of an active income. The employer will stop paying me a salary if I stop work.
When I think of the idea that money keeps streaming into my bank account with little or no work, I am really excited! Since the idea is so enticing, I decided that I want to focus my attention on building passive incomes. But what are the possible ways to build passive income? Especially when I do not have much savings at hand?
One way that I can think of is to write a book. The main cost will be time on my part. But if I am able to convince a publisher to publish and sell my book, then I will be able to earn royalty fee based on the number of books that are sold. This is a possible source of passive income to build.
The other way that I can do is to build a network marketing business. It is also know as multi-level marketing business. In this kind of business, the distributor will need to get the license to sell the products from a parent company that is a network marketing company. The fee to be a distributor is usually very affordable. The distributor then tries to sell the products to potential customers and earn commissions from his sales.
Also, he can build a network of distributors under him. If he meets his sales quota and his team of distributors meets their sales quota, he gets paid for commissions from his own sales as well as his team of distributors. But if he did not meet his sales quota and his team of distributors meets their sales quota, then he will not get any commissions from the sales of his team of distributors. The tricky part to create this stream of passive income is how to choose a network marketing company that is legitimate, stable and big growth potential.
No matter which source of passive income that I am trying to build, I notice one thing in common. Hard work is definitely required to these building the passive incomes.

I learned from Rich Dad series that an asset is one that generates positive cash flow. If it does not generate income, then it is a liability. For example, a car is liability if it does not generate positive cash flow. If I rent out a car and it earns a monthly rental income, I will need to do a simple calculation to determine whether it is an asset or liability. (more…)

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Fun with Cashflow 101!

Sunday, January 7th, 2007
When I first heard about Cashflow 101, I was very excited and wanted really to play the board game. To play the game, I faced two issues. Firstly, I needed to have a copy of the board game. Secondly, I needed to find a group of people who were willing to play the game together. Luckily for me, one of my friends had the board game. Also, I managed to find a few friends who had read the book Rich Dad Poor Dad. They were also very keen in playing the game. Thus, both issues were easily solved.
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I managed to play for a few times. And I had really learned a lot from just playing the game. Of course I did not have an immediate enlightenment on the concepts that the game is trying to teach! Neither do I claim that I have understood all the concepts. But before I go about describing what I have learned, it is important that you have a general idea of the game. This may help you to understand what I have learned so far from playing the game.
Cashflow 101 is a board game designed by Robert Kiyosaki, the author of Rich Dad, Poor Dad. It aims to teach the players the concepts of investing and building passive income. To start the game, each player has a score sheet to track his passive income and expenses. It is similar to keeping track of financial statements in real life. There are 2 tracks in the game. The first track is where everyone starts playing. It is known as the rat race track. In the rat race track, the player may be required to spend for vacation. He may also have another child that causes his expenditure to go up. He may lose his job thus no income for a few months. He will face financial worry or difficulties like in real life situations.
Also, the player will encounter opportunity to invest in shares, real estates, businesses and so on. Basically, the player will encounter very real life liked situations that required decisions on investments. He may also encounter a situation where he does not have the cash to invest in a golden opportunity.
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In order to get out of the rat race to the second track that is known as the fast track, the player has to learn to invest until his passive income surpasses his expenses. Once he has attained that, he will try to buy his dream or accumulate an additional $50,000 monthly cash flow to win the game.In summary, the game gives the players the chance to experience real life situations even before they have happened. It is like giving them a glimpse of the future of what may happen if they stay in the rat race. It also provides the players a glimpse of an alternative bright future if they get out of the rat race. This is provided that they learned about cash flow, expenses, investment and building passive income.That is just an introduction based on my personal experience of playing the game. I really loved playing the game. I hope that you can visual the board game to a certain extent. Now, let me shared with you what I had learned so far from playing the board game.
Firstly, if I were in the rat race track, I would be just waiting for paycheck after paycheck. My monthly salary would not increase much annually. And it would be like that for the rest of the years to come. In the board game, the rat race track is very short circular track. If each complete cycle were to represent a year, then time really flies fast on the board game. This gave me a glimpse of what my future would be liked in the next 10 years if I remained in the rat race track.
Secondly, if I did not invest in things that generate me passive income, I would take a very long time to clear my mortgage and debts by just saving. Saving is very important! But saving alone will not get me out of the rat race. If I want to get out of rat race in real life, then I have to learn to invest and build passive income.
Thirdly, I realized that if I was too greedy in the game and over invested beyond my financial means, I could easily go broke due to unexpected expenses or lost of job. Thus, it is important to manage my cash flow carefully in real life.
Lastly, I realized that it is important to save so that I could invest when a golden opportunity came knocking on my door. In the board game, I had a golden chance to invest on something that really gave good returns. But I did not have enough saving, thus I had gave it a miss.

When I first heard about Cashflow 101, I was very excited and wanted really to play the board game. To play the game, I faced two issues. Firstly, I needed to have a copy of the board game. Secondly, I needed to find a group of people who were willing to play the game together. (more…)

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