Cash-flow

Why we always talk about cash-flow? Why flow? What would be the main criteria for the health specifically on our blood circulation system? How about our plumbing system? How to judge our plumbing system is good enough? How about the traffic? What is the main criteria to claim that our traffic is good? YES!!! The answer is very simple where the FLOW is the main criteria to gauge the healthiness of all the above mentioned. Hence, the main criteria to gauge our health level in our financial report is the cash-flow. Some would say that this cash-flow is only applicable to business and not for individual which salary based source of income. Great! Let us discuss further about the cash-flow that we can apply in our day-life.

I believe most of us have read my previous article on Saving - Part 1 and Saving - Part 2 which is the main criteria to start our investment portfolio. I also have published on our first investment would be our steady savings which can be read here. As highlighted earlier where people may claim that cash-flow is only applicable for business and not much related to person with salary based source of income. This scenario is not really a credible scenario because the first investment portfolio is via our saving, you may read Investment – Savings. Hence, cash-flow for an individual as a start will be the amount allocated for the savings every month. If you noticed that you can’t able to manage your cash-flow at least with certain amount to show the positive cash-flow then you have to develop attitude towards investment mindset, you may read here to have some idea.

When you have developed to have positive cash-flow from your monthly income which is your salary based income source then with some capital you have developed from your saving you may start our investment portfolio. Bear in mind that when we discussing about the investment portfolio, it is not necessarily to be portfolio creating millions of dollar in our cash-flow but at least something positive which could be just RM 1. As we discussed earlier, we’ll find that our portfolio slowly will give more and more cash-flow which ultimately will create our multi-million wealth portfolio. How to reach that? Be patient and passionate with our goal to achieve our financial freedom. Remember the double-P!

Attitude Vs Investment

Success in investment are partly or I would say that contributed by our attitudes. As time flies, we’ll see more money in investment, if can’t control our attitude might end-up with disaster. That is the reason I always emphasize that better to be not rich instead of being poor. If you notice, in anything if you have problem with your attitude then you’ll face the disaster. This is regardless of the tools or mechanism that you could have is the best available but due to attitude can be totally disaster to you. In this case, don’t limit to finance subject matter only, for example on driving attitude; even you’re driving the best car in town but if your attitude is not tally with your class of your car then all the safety features promoted by the car manufacturers are waste.

This attitude is the one will guide parallel with the financial planning we have developed or being developed. Hence, most of the time we need somebody professional to guide us with discipline so that the goal can be achieved. This is because when we have the professionals with us then we have to follow their plan for us to see the results as we’re paying to them for professional fees which could be very costly but very effectively. From there we can develop our attitude to be more constructive manner to achieve our financial freedom. What I’m writing here is based on my personal experience where before I’ve got my personal financial planner my saving will not be long-lasting because normally at the third month I’ll use my savings to pay-off all my bad debts. By having professionals with us, we indirectly able to educate ourselves to allocate our savings totally for savings so that it will be our platform to start our investment. Now it’s very difficult for me to withdraw the savings for any unnecessary expenses which are mainly bad debts.

So, what I would say about how attitude is affecting our investment portfolio is mainly on managing our cash-flow and the first cash-flow we have to prove that we are good in our attitude against investment by maintaining our savings progressively. From there we have capability to develop our positive cash flow in our investment portfolio.

Lifestyle

Why lifestyle is very crucial towards achieving our financial freedom? How exactly it affects our process to achieve our goal? How does rich practising their lifestyle and how about the other side? Not clear about the other side? Well, the poor I meant.

 

There are always myths are about the rich and the poor. Rich always are blamed to be too greedy and stealing money from others to become richer and richer. Poor always claim that they are always being discriminated by rich in most of the places. As long we believe that this myths are true then definitely we cant be the rich because we always see the rich is the villain and the poor is the hero.

 

Personally I don't agree with all the myths because I want to be rich and want my family, relatives, friends, and whoever reading this to be rich. Why don't you go back on some history of the rich people where they started with very poor family but ended up with indefinite wealth. No need for me to mention it here because almost all of the top 100 richest person in the universe are from poor family background.

 

 

So, what exactly the main criteria is differing between rich and poor? YES!!! The lifestyle of these two (2) different people is totally different! I believe that some might be thinking that "obviously different because rich spending like nobody business and the poor is spending wisely".

 

If we analyse wisely of this rich people's lifestyle, they have very systematic or proper recording of all their expenses. Why? Spend sometime and read some of my previous articles on Saving, Earning Vs Saving, Levels of Financial Freedom, and lot more. You will find the key elements on how to be rich slowly and steadily. The rich people also practising very systematic book keeping to monitor what is in and what is out. Most of the time, active income from rich people are untouchable or recirculated for investments. Last but not least, rich always allocate some portion of their wealth to be shared with others via charity.

 

How about the poor? Hmmmm.... They don't have proper recording at all, no book keeping, no traceable records, and always rely on active income only for their life. Hence, spend more time to invest on knowledge prior to take action to avoid unnecessary mistakes. Best of luck for us buddies! 

Consistency - Part 1

How consistency does important to us? How does it affect to our goal to achieve financial freedom? What it does? What are the benefits if we are consistent in doing something good for us?

You may have noticed that I’ve been telling the knowledge is very important to achieve our goal to be free financially. So, how can we get this knowledge CONSISTENTLY? We must align with latest information in investment world on banking products available, portfolio available, etc. And definitely all these are halal and legitimate! In order to equip with latest information or knowledge we have to ensure to read, share, and ask people CONSISTENTLY. When we read we know something new is available in the market or something we know is already obsolete in the market. When we know something new in the market we may want to share with our colleagues and later may ask them whether they are familiar or new to them. If they are familiar with our latest information, things get easier because we have someone can explain further on the information so that easier to digest. When we easily digest the information, then it is easier for us to take action which ultimately will give us the results.

When we develop our consistency in reading, sharing, and asking, we’ll benefit without noticing it. From this consistency we can develop discipline internally to keep on reading to gain more knowledge before take into action. Why is this so important before take action? Huh?! It’s simple because we can see the impacts based on lesson learnt people have shared from the readings. We may share our colleagues and they might have experienced it in reality and could be our benchmark prior to take action.

Since we go on with reading, sharing, and asking consistently we are indirectly gaining experience by reading to others experiences. Experiences are something very precious because they may save you from very big disasters. We must be very thankful if there are people to share their experiences even they are charging us with some amount. I would suggest to get this experience by reading so that we have ample time to digest and later we can ask somebody more familiar. This could be more efficient and economical!

While acquiring the knowledge and experiences by reading, sharing, and asking; you may indirectly have developed passionate and confidence in investment. This leads to develop interest in subject matter which is in this subject related personal finance and investment. It could be a bit difficult at beginning but believe me, you’ll feel the sweetness by doing it CONSISTENTLY!

Levels of Financial Freedom – Part 3

We have seen from level four (4) to level three (3) was like a magic where suddenly have some passive income but very minimal amount and cannot be used as our core income in our life due to insufficient amount. So, we can move ahead for higher level?

Again to achieve higher level is not something can be achieved overnight but will take some time and efforts to reach there. Now, to be in level two (2) where our passive income could cater our expenses or is higher than our expenses will be more challenging because we have trained ourselves to spend more than 50% of active income (very common scenario). Remember that our passive income still lower than our active income in this level two (2) but somehow able to cater our expenses. In this level, our passive income not possibly from dividends only but should be some other means like in property investment, businesses, etc. Bear in mind that all these must be halal and legitimate so that we are seen as the most handsome or beautiful person financially.

Similar to level three (3), we could reduce first our expenses so that we can develop our confident level to go ahead for sourcing some means of passive income. There so many means where we can get passive income but ensure we are well equipped with knowledge so that risk and loss can be minimized. Don’t simply attempt without knowledge, and the worst part is don’t simply acquire knowledge without taking any action (I hope you can get my point). Once you’re taking action, then experience will follow and you’ll find your skills much better than the beginning of your involvement.

Great! Now we have reached level two (2) and eager to go for level one (1) where anyone in this earth are looking to be in this level. What is the main difference? Obviously, passive income more dominant than active income and it could be passive income is much higher than total of active income and expenses. How it could happen? This is something like from level four (4) to level three (3) where the skills play a role to acquire more means of passive income; you’ll experience once you have reached level two (2). Many more to come on this passive income in future articles. So, stay tune with me!

The key element to be financially free here is that we must be very passionate and patient in achieving our target because there will be so many challenges along the way. Always remember “where is will, there are multi-ways”.

Levels of Financial Freedom – Part 2

We have discussed about the worst level or stage of the ranking in financial freedom ruler. Wow!!! It seems like music chart where we have ranking will be changing by weekly basis and similarly our aim to move on to be the best level in financial freedom ruler.

The next level or level five (5) will be the expenses is equivalent to the active income or the monthly salary received by us. This seems like not an issue but ultimately will affect our goal to achieve financial freedom. What would be the possible ways to bring our level to next level (level 4)? Exactly! Similar approach like we did to move from level six (6) to level five (5). What? Forgot? Yes, then you have to read, read, and read even the same materials until we take it into action.

After we have cut expenses and increase our income (mainly active income), we should able to move to level four (4) where our expenses is less than our active income which may put under savings which ultimately will be used as our fund or capital for investments. All this lift-up process of the levels will not happen overnight but will take some time and we have to be passionate and patient to move steadily. Remember about consistency!

So, we have some savings from surplus of our active income and we should have put somewhere to give us some return which is mainly some dividends because at this level this is the only potential passive income for us (even there are potential better investment with proper planning). Without noticing it, we have moved to level three (3) where we have some passive income but definitely much lower than our expenses.

Let us digest first these three (3) levels here before we proceed higher level which are level 2 and ultimately level 1. Digest here is not only read, read, and read but also understand prior to take action. Definitely later we must take action to make it realistic. Whoever have reached this level, CONGRATULATION! We’ll move ahead to higher level soon.

Levels of Financial Freedom – Part 1

How can we gauge our financial freedom level in life? Are we healthy enough financially? How to optimize it? What are the supplements can be taken to improve our healthiness? All these are important because we can only improve if we are able to detect our own loopholes. It’s not sufficient only by knowing the loopholes but must know how to rectify it so that our goal for financial freedom can materialized as we planned.

I personally segregate level of financial freedom into six (6) different levels by referring to our active income, passive income, expenses, and savings. How all these four (4) items are very important? These are the tools can gauge our attitude and reflect it into our financially healthiness which can be rectified if we have certain “diseases” which may be harming our goal to achieve our financial freedom.

The worst level ever in financial freedom is where our expenses is more than our active income. What? Where is our passive income? My friend, if there deficit in our balance sheet, it shows that there is no other income except our active income. In this situation, the most probable causes are due to bad debts and money spent to unnecessary items, i.e. updating gadgets based on latest available models which ultimately reflect our bad habit in finance subject matter. So, how to rectify it to be at the best level or at least one level higher than this worst level? You may go on How To Start Saving - Part 1 and How To Start Saving - Part 2 as a starter to rectify your "illness" and comment if have some specific area to be discussed.

We will discuss more on the remaining five (5) levels in the next coming article Levels of Financial Freedom – Part 2. List down all our passive income, active income, and expenses so that we can gauge our level if we are lucky enough not to be in this level. Again! Remember that money could be the Cash King but knowledge is the QUEEN to manage our wealth wisely.