Cashflow Blog

The title to this post is a little off in that most times people invest in things in order to get wealthy.  Either way you look at it, there is much research on this subject.  Funny thing, it is not primarily mutual funds or even individual stocks that make up the portfolios of the wealthy.

First, lets define wealthy. 

There are three generally agreed upon categories.  The mass affluent which has a net worth outside of their primary home of $100,000- $999,999.  The wealthy which has a net worth outside of their primary home of $1,000,000- $9,999,999.  And the super wealthy which has a net worth outside of their primary home above $10,000,000.

Interestingly, the investment strategy is basically the same between the wealthy and the super wealthy. And the higher you go in net worth for the mass affluent the more they look like the other two classes.

So how do they invest?  What financial instruments do they use?  Well, the truth is they use all sorts of financial instruments, but there are two main strategies which set them apart from those that have less than them.

First, is real estate.  The largest categories of investments for the wealthy is real estate and it only gets larger as you go up the wealth ladder.  Of course they all own a primary home.  But a second home is the next largest category of real estate investment.  And as you go up the scale they own 3,4 or more homes. 

Next category is income producing real estate.  The wealthy own apartment buildings, commercial buildings, duplexes, etc. that will produce income for multiple generations.  REIT’s (real estate investment trusts) are favored by the wealthy. Raw land is bought and sat on until the investment blooms.

The next largest category is businesses. Usually they control or own large blocks of a business that can be best called creative or niche businesses.  The wealthy have been able to identify unique ways to satisfy needs.  Many times the discovery has come out of a industry that they worked in for years, first as a employee.

They also own some of the traditional investment classes like stocks, bonds, mutual funds.  However, it is at much smaller percentages than the non-wealthy.  For example, the super wealthy own individual stock and mutual funds, but the median ownership is around $1,000,000 for individual stocks and $500,000 for mutual funds. 

Now remember, the super wealthy category starts at $10,000,000.  So their stock ownership percentage is very small compared to their overall assets.  They own cash value life insurance at about the same percentages as their stock ownership.

Their overall startegies suggest an understanding of the tax laws, so that they legally avoid high outlays to government.  It also tells us they understand history.  The greatest investments, those that last for generations until someone forgets why they were purcashed in the first place, are income producing real estate. 

Imagine if your great grandfather purchased apartment buildings in Manhatton or Miami Beach or Chicago.  What would they be worth now?  How much income might they be producing for you?  The truth is, businesses come and go and our needs change, but we always need a place to live or a place to shop.

Maybe you are not the landlord type, like me.  The thought of having  renters calling me all hours of the day and night to have the plumbing fixed is my nightmare.  But there are many ways to own real estate that don’t have that nightmare.

Think about starting a business that fills a niche.  Think about investing in real estate.  If you can find success in these two areas, then you are likely to join the wealthy or even the super wealthy!    

source: shaferfinancial.wordpress.com

Read more:
What do the wealthy invest in?

Your journey towards financial freedom isn’t complete without these obstacles which you must learn to face and conquer. The sooner you take action against them, the sooner you achieve wealth.

Impulse Buying

Through the years, I have changed from an impulsive buyer to a frugal shopper. It took some time and a lot of personal motivation but I was finally able conquer this bad habit. If I was able to do it, I don’t see any reason why you can’t. Whenever I’m faced with an urge to buy something unplanned, I usually pause and ask myself several questions first. These simple dialogue with myself has become a powerful tool for me and I hope it will be for you too.

Inflation

Inflation hurts people particularly those in fixed incomes like the elderly and those whose income isn’t indexed to inflation. They lose a part of their purchasing powers because their cashflow remains constant while their cost of living increases. Employed individuals, despite receiving constant salary increments, are hurt because there is a time lag in compensation adjustments. By the time they receive higher nominal income, it has already been months since the prices of commodities went up.

Procrastination

Procrastination simply refers to the habit of putting off doing something for a later time. Filipinos are more familiar to the term mañana habit, which is often translated to Tagalog as “mamaya na” (much later). Aside from the definition, it is also necessary to learn why we often choose to procrastinate. Is it simply because we are too lazy to act or is it something much deeper? More importantly, how do we get rid of this bad habit? What is the best way to really overcome procrastination?

Fear of Taking Risks

A simple video which tells the story of my first burn (a term that refers to the first time a person will spin a fire poi). I can still vividly remember that night when I learned how to face my fears and got the courage to take the risk. I hope that this will inspire you to likewise do the same in your life.

Wrong Beliefs About Money

If you think about it, money is simply defined as a tool that we use to acquire the things that we need or want. It is a non-living thing that is void of emotion or bias. Take a bill out of your wallet right now and look at it. Would you agree with me if I say that you’re simply holding a piece of paper?

~ fitzvillafuerte.com

Read the original post:
Your Enemies Towards Financial Freedom

We all want to get ahead. You hear people say it all the time. But what exactly does that mean?

It’s kind of a vague statement, but it sounds good.

Basically, it means that you want to have more money?maybe get your earnings ahead of your cash depletion. Maybe it means you want to be able to save enough to send your kids to good universities, or be able to take your family on annual vacations. It could mean that you want to squirrel away a retirement fund.

Whatever your particular idea of getting ahead, it does imply some sort of motion movement from where you are now to where you want to be.

That means you must figure out exactly where you are now and where you should be going. Once you start to think about it, though, you may find those places are a little more difficult to determine than you had originally thought.

You may find yourself beginning to struggle with just what your particular concept of getting ahead is.

Robert Kiyosaki, who authored the popular Rich Dad series of books, has mapped out a way for you to tell where you are and where you should be, if building wealth is your goal. He also gives you a plan on how to get there.

In his book “Cash Flow Quadrant”, he introduces readers to a concept that the man he called his “rich dad” introduced to him years ago.  This quadrant is an illustration of where your money is coming from and subsequently how you think about money.  Believe it or not, the two things go together.

For instant, if you are in the E quadrant, you are an employee in search of security.  Someone in the S quadrant is self-employed and likes to be in control, to do things their way. A B quadrant person is a business person. (This is very different from an S-quadrant person because the B has a system that can work without their direct input, thereby freeing them for other, wealth-building, pursuits.) The I quadrant person is an investor.

According to Kiyosaki, that quadrant not only tells you where you are, but where you should be. If you are on the left side, in either the E or S quadrant, you should be making plans that will move you to the right side?first to the B quadrant then into I.

In order to do that, you need to increase your wealth by taking a job that affords you the money to invest or the time to build a business system. The system will take care of your personal needs, afford you the time to learn about investing, and provide you with the cash to purchase real estate equity.

That is how you get ahead. It is a process, and you have to be systematic about it. You can’t just jump into investing without knowing what you’re doing. That is foolhardy and dangerous. You also can’t jump in if you haven’t gotten your basic needs covered. First, make sure that is taken care of. Then expand.

More:
How To Get Ahead

~ by Robert Kiyosaki

If you’re serious about getting rich, now is the time. We’ve entered a period of mass-produced pessimism, when bad news is everywhere, and the best time to invest is when optimists become pessimists.

The Weird Turn Pro

Journalist Hunter S. Thompson used to say, “When the going gets weird, the weird turn pro.” That’s true in investing, too: At the height of every market boom, the weird turn into professional investors. In 2000, millions of people became professional day traders or investors in dotcom companies. Mutual funds had a record net inflow of $309 billion that year, too.

In an earlier column, I stated that it was time to sell all nonperforming real estate. My market indicator? A checkout girl at the local supermarket, who handed me her real estate agent card. She was quitting her job to become a real estate professional.

As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market. That’s what’s happening now.

Pessimism vs. Realism

In 1987, the United States experienced one of the biggest stock market crashes in history. The savings and loan industry was wiped out. Real estate crashed and a federal bailout entity known as the Resolution Trust Corporation, or the RTC, was formed. The RTC took from the financially foolish and gave to the financially smart.

Right on schedule 20 years later, Dow Industrials and Transports struck their last highs together in July 2007. Since then, nothing but bad news has emerged. In August 2007 a new word surfaced in the world’s vocabulary: subprime. That October, I appeared on a number of television shows and was asked when the market would turn and head back up. My reply was, “This is a bad one. The worst is yet to come.”

Many of the optimistic TV hosts got angry with me, asking me why I was so pessimistic. I told them, “The difference between an optimist and a pessimist is that a pessimist is a realist. I’m just being realistic.”

As we all know, things only got worse in early 2008, with the demise of Bear Stearns and the Federal Reserve stepping in to save investment bankers. In February, many of those optimistic TV (and print) reporters became pessimists — and when journalists become pessimists, the public follows. By March, mutual funds had a net outflow of $45 billion as investors fled the market.

Surviving the Bad Times

Back in 1987, as savings and loans closed and investors’ stock and real estate portfolios were wiped out, my wife, Kim, and I were living in Portland, Ore. Many people were depressed and hiding from the truth. The following year, I said to Kim, “Now is the time for you to begin investing.”

In 1989, she purchased a two-bedroom, one-bathroom house for $45,000, putting $5,000 down and earning $25 a month in positive cash flow. Today, she owns over 1,400 units and — because more people are renting than buying — she earns hundreds of thousands a year in positive cash flow.

The period from 1987 to 1995 was a rough one, even for the rich. In his book “The Art of the Comeback,” my friend Donald Trump writes about being a billion dollars down at the time. Rather than give up, he kept on fighting to survive. He and I often talk about how that period was great for character development.

Two-Year Warning

I believe we’re through the worst of the current bust. I know there will be more aftershocks, and the news will continue to be pessimistic for at least two more years, possibly until the summer of 2010.

But the upside to this is that it gives us at least two years to do our market research and find the next big stock or real estate bargain. Before buying, I strongly suggest you study, read books, and take courses on your asset of choice. If your choice is stocks, take a course on stocks or options. If it’s real estate, take a course on real estate. Now is the time to learn; not only will you know more than the average person and be in a good position when the market turns, but you’ll also meet people with a similar mindset.

You have about two years to get into position. Opportunities this big don’t come along often, so this is your time to get rich.

Climbing Bulls, Flying Bears

Am I optimistic for the long-term? Absolutely not. I still believe we’re due for the mother of all market crashes, and that the U.S. economy is running on borrowed time — and I do mean borrowed. I think most baby boomers are in serious financial trouble, and that oil will climb above $200 a barrel. Inflation will also increase, causing more pain for the poor and middle class.

The Fed is flooding the market with nearly a trillion dollars of liquidity, which is why I believe gold under $1,200 an ounce and silver under $30 an ounce are bargains. Gold and silver should peak and decline before 2020, completing two 20-year cycles. My exit is to sell silver around 2015. I plan to hold onto gold, income-producing real estate, oil wells, and stocks.

Most of us know the bull climbs slowly up the stairs, but the bear jumps out the window. I believe the bull is still climbing the stairs, and the bear hasn’t jumped yet. But rest assured that it will.

See the rest here:
When Pessimism Prevails, It?s Time to Get Rich

When someone is just setting out on a business venture, it is imperative that they find a mentor. A mentor can escalate your business, boost your self-development and improve your business know-how. To be truly effective you should look for mentors with various types of expertise so that you can learn from all of them and use the knowledge to make yourself a better person and run a more successful business.

Before embarking on your quest to find a mentor you first need to examine your life and business. Figure out in which areas you need help. Once you know the focus areas, you can begin your search for a mentor.

Look for experts in the field of expertise you want to develop. After all, as entrepreneurs and business owners, you will want to achieve some level of success or acquire and learn certain skills that you may lack in. A truly successful person always has a mentor who has helped him or her shape their path and pave the way for a better future.

There are many places to find a great mentor such as networks meetings, industry events and conferences, through the recommendation of a trusted colleague and even through online groups you belong to.

Once you have identified the mentor, take some time to watch them in action. If you feel this person is someone you can really learn from contact them to set up a time to talk.  Make sure you inform the person why you want to talk with them.

You should be very clear why you want that person to mentor you, for how long, and what you hope to gain during the mentorship. If the person agrees, you now have a mentor.

Having a mentor will increase the speed at which you can learn new skills. It is essential that you respect your mentor enough to implement their ideas as appropriate. There will be times you will need to get out of your comfort zone based on a mentor’s recommendations. And yet, isn’t growth the reason you wanted a mentor in the first place?

Read the original:
How to Find the Best Mentor for Your Needs