Invest Wisely
There are two major types of investments you can make:
a. Capital gains. The purpose of buying capital gain opportunities is to increase the amount of money on hand so that you can make bigger, more sustainable cash flow investments. This comes in terms of stocks, options and futures, and commodities like gold and silver. The principle is simple, buy low, sell high. You gain the spread. Be careful of brokerage fees and fund management fees though.
b. Cashflow. Be careful as there are 3 types of cashflow investment outcomes.
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Positive Cashflow. When you make more money than what you have to pay per month.
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For example, invest in a duplex. You will need to make a downpayment, a mortgage agreement with monthly installments, building maintenance and insurance. So you have to weigh the monthly outflow of cash against the rental you will receive. If it is positive with a chance of property price appreciation, go for it.
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You don't have to buy only real estates to generate active income. Human are intellectual enough to invent business models that can potentially generate perpetual active income, with a small investment. We are talking about joining network businesses. With a small registration fee and extra efforts outside of work, you have the potential to generate an endless network who consumes the product so regularly that the earnings are perpetual.
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If you possess intellectual property, register it and earn royalties. You can write a book, compose a song, register a new patent, etc.
You need a combination of the aforementioned items to build enough active income. Meanwhile, keep the expense low by paying off the debts when you have idle cash - the cash that sits in your saving account without any investment opportunity.
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Negative Cashflow. This causes bankruptcy regardless of how much money you make per month. Creditors will force you to liquidate your assets at a loss. It is just terrible, even in the Cashflow 202 game. Sometimes, people make a wrong investment decision too. For example, you see a duplex that generates 1,000 dollars a month. The building cost is 200,000. Downpayment is 20,000. You pay that with 5000 cash and 1500 bank loans. The monthly installment for the bank loan is 1500. Looking back to the monthly income of 1000 without even counting the mortgage repayment, this duplex will cost you money instead of increasing your wealth.
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Zero Cashflow. This doesn't mean you have to avoid all the zero-sum games. If a duplex generates 1000 dollars while you pay 10000 in cash plus 10000 in bank loans. Although you have to pay 1000 to the bank, this expense can be eliminated later with capital gains.
Repeat your iinvestment in capital gain and cashflow opportunities wisely. Remember to pay off your debt to reduce the monthly expenses. The financial freedom will not be too far from your reach.
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