How to find assets with protecting walls (or economic moats )?
When an asset is able to bring positive cash flow, it is an asset; otherwise, it is a liability. Therefore, to ensure you always have positive cash flow, you need to ensure your assets are safe. Some assets have protecting walls (or economic moats). Different assets, the walls may be different. Prior to purchasing an asset, you should ensure walls are strong enough. And the walls will become more and more solid. Some examples are shown below.
1) Monopolistic business. For examples: water suppliers, electricity suppliers, internet providers, etc. But, you should be caution the result caused by some unpredictable events such as the trouble of some business during "2018 California wildfires".
2)Unique business. For example: Coca Cola
3)System business. For examples: McDonald's, Senior health care center
4) Local short-term irreplaceable business. For examples: local universities, local hospitals.
Can you find other protecting walls?
Keep in mind, only asset with protecting walls (or economic moats) has the capability to create positive cash flow continuously.
Thursday 31 January 2019
Tuesday 29 January 2019
Is debt a good thing?
Is debt a good thing?
Many people don't think that they want to be in debt. Without debt, they feel good. With debt, do they really have troubles?
If you don't rent a car and want to reach your destination, you have to walk, take taxi, or take bus; if you rent a car, you can go anywhere with lower cost compared with taxi's cost. Does it mean you don't need to rent a car because you are afraid of incident? Actually, incident may occur in both scenarios. The question is if you are able to drive a car properly and can mitigate risks.
Same idea, if you borrow money to make a reasonable investment and have skills to control risks, you will get positive cash flow. That is your passive income.
Therefore, don't be afraid to borrow money. But, you should keep in mind to improve you skills to have good debt other than bad debt.
Many people don't think that they want to be in debt. Without debt, they feel good. With debt, do they really have troubles?
If you don't rent a car and want to reach your destination, you have to walk, take taxi, or take bus; if you rent a car, you can go anywhere with lower cost compared with taxi's cost. Does it mean you don't need to rent a car because you are afraid of incident? Actually, incident may occur in both scenarios. The question is if you are able to drive a car properly and can mitigate risks.
Same idea, if you borrow money to make a reasonable investment and have skills to control risks, you will get positive cash flow. That is your passive income.
Therefore, don't be afraid to borrow money. But, you should keep in mind to improve you skills to have good debt other than bad debt.
Sunday 27 January 2019
If you have money, pay your mortgage first or invest first?
If you have money, pay your mortgage first or invest first?
If your principal residence's mortgage has not been paid off, general speaking, it will be good to deposit the money to your mortgage account other than invest account directly. It will ensure you pay off your mortgage sooner.
Then, go through a home equity line of credit (HELOC) or refinancing to get the fund to re-invest such as buying real estate. The advantage is that the loan interest is the investment cost and can be tax deductible. The disadvantage is that the fund is usually less than the whole money mentioned in the title. It is important to note that the investment income can be deposited in your principal residence's mortgage account again to accelerate your mortgage pay off.
If your principal residence's mortgage has not been paid off, general speaking, it will be good to deposit the money to your mortgage account other than invest account directly. It will ensure you pay off your mortgage sooner.
Then, go through a home equity line of credit (HELOC) or refinancing to get the fund to re-invest such as buying real estate. The advantage is that the loan interest is the investment cost and can be tax deductible. The disadvantage is that the fund is usually less than the whole money mentioned in the title. It is important to note that the investment income can be deposited in your principal residence's mortgage account again to accelerate your mortgage pay off.
However, if your principal residence's mortgage rate is far lower than HELOC or refinancing rate, it is necessary to balance your principal residence's mortgage interest and net re-investment income prior to decision-making.
You need to be aware the risks of re-invest and develop strategy to mitigate risks.
Saturday 26 January 2019
How to own assets?
How to own assets?
Without money, it does not mean that it is impossible to own assets. You can get eggs no matter buy hen to lay eggs or borrow hen to lay eggs.
1) Purchase assets using your money. For example, invest a franchise, hire some people to help you. You may obtain passive income from the franchise.
2) Long-term lease assets. For example, sign a 10-year house lease contract with the property owner, and then rent each bedroom separately.
3) Own (rent or buy) assets with partners. For example: buy or rent an apartment building with partners and rent each unit to collect passive income.
4) Buy after renting. If the third item is successful, you can also consider buying the apartment building and eliminating the annual rent that has to be paid to the property owner.
5) Borrow money to buy asset. For example, borrow money from a bank to buy a condo for rent.
6) Create assets by yourself. For example, copyright investment, such as: developing software, writing books, publishing audio or video, etc., providing valuable information to readers and obtaining advertising revenue.
7) Ask people to create assets for you. For example, the software mentioned in item 5, you may ask someone to develop it for you.
There are many others. But, you need to learn and think more while practices.
Without money, it does not mean that it is impossible to own assets. You can get eggs no matter buy hen to lay eggs or borrow hen to lay eggs.
1) Purchase assets using your money. For example, invest a franchise, hire some people to help you. You may obtain passive income from the franchise.
2) Long-term lease assets. For example, sign a 10-year house lease contract with the property owner, and then rent each bedroom separately.
3) Own (rent or buy) assets with partners. For example: buy or rent an apartment building with partners and rent each unit to collect passive income.
4) Buy after renting. If the third item is successful, you can also consider buying the apartment building and eliminating the annual rent that has to be paid to the property owner.
5) Borrow money to buy asset. For example, borrow money from a bank to buy a condo for rent.
6) Create assets by yourself. For example, copyright investment, such as: developing software, writing books, publishing audio or video, etc., providing valuable information to readers and obtaining advertising revenue.
7) Ask people to create assets for you. For example, the software mentioned in item 5, you may ask someone to develop it for you.
There are many others. But, you need to learn and think more while practices.
Thursday 24 January 2019
How to survive on the way to financial freedom?
How to survive on the way to financial freedom?
Many people have made various investments in pursuing financial freedom. Because of the risk of investment, someone fell on the road to financial freedom. So, first of all, you have to survive before you can achieve financial freedom. How to survive? A positive cash flow.
Wealth is like water in a tank with inlet pipes (income) and outlet pipes (expense). When the inflow rate is greater than or equal to the outflow rate (positive cash flow), the fish in the tank can survive. Otherwise the water in the tank will eventually run out (negative cash flow). The fish will die. When spending is greater than income, to avoid death, you have to increase your income and/or reduce your expenses.
For example, if a homeowner has no enough money to pay mortgage on time, the bank will take back the house. However, if the monthly payment is reduced (of course, the total payment time is lengthened), the homeowner can pay mortgages on time without problem. The bank will not take back the house. This strategy will win time for the homeowner.
Remember: positive cash flow is the king.
Many people have made various investments in pursuing financial freedom. Because of the risk of investment, someone fell on the road to financial freedom. So, first of all, you have to survive before you can achieve financial freedom. How to survive? A positive cash flow.
Wealth is like water in a tank with inlet pipes (income) and outlet pipes (expense). When the inflow rate is greater than or equal to the outflow rate (positive cash flow), the fish in the tank can survive. Otherwise the water in the tank will eventually run out (negative cash flow). The fish will die. When spending is greater than income, to avoid death, you have to increase your income and/or reduce your expenses.
For example, if a homeowner has no enough money to pay mortgage on time, the bank will take back the house. However, if the monthly payment is reduced (of course, the total payment time is lengthened), the homeowner can pay mortgages on time without problem. The bank will not take back the house. This strategy will win time for the homeowner.
Remember: positive cash flow is the king.
Wednesday 23 January 2019
What is the first step to create wealth?
Owning wealth does not guarantee freedom. However, if you want to have freedom, you must have wealth. What is the first step to create wealth? The first step is to understand the difference between assets and liabilities. Asset is the thing that can bring you wealth continuously; liability is something that takes away your pocket wealth. Through the following discussion, I hope to inspire you thought. I am also looking forward to your comments.
1) Is a house an asset? If it is for you living, it is not an asset, because it always takes out the money from your pocket and pays it to the house insurance/hydro/electricity/property tax/maintenance/management fee, and so on. If it is for rent, and there is positive balance after expense deduction, then the house is an asset.
2) Is a car an asset? If it is used for rent, deducting various expenses, there is excess income every month, then, the car is an asset; otherwise it is liability.
3) Is stock an asset? If the dividend can be continuously generated every quarter or on a regular basis, it is an asset; otherwise it is a liability, because the money used to purchase the stock is locked in the stock market, and the stock transaction fee is also paid. Please note, if you buy stocks, expect to sell after the appreciation, this activity is considered investment or speculation, other than assets purchasing.
4) Is gold an asset? Obviously, gold does not create stable income. Many people buy gold to earn the appreciation and for hedge purpose.
Therefore, to create wealth, the first step is to differentiate assets and liabilities.
1) Is a house an asset? If it is for you living, it is not an asset, because it always takes out the money from your pocket and pays it to the house insurance/hydro/electricity/property tax/maintenance/management fee, and so on. If it is for rent, and there is positive balance after expense deduction, then the house is an asset.
2) Is a car an asset? If it is used for rent, deducting various expenses, there is excess income every month, then, the car is an asset; otherwise it is liability.
3) Is stock an asset? If the dividend can be continuously generated every quarter or on a regular basis, it is an asset; otherwise it is a liability, because the money used to purchase the stock is locked in the stock market, and the stock transaction fee is also paid. Please note, if you buy stocks, expect to sell after the appreciation, this activity is considered investment or speculation, other than assets purchasing.
4) Is gold an asset? Obviously, gold does not create stable income. Many people buy gold to earn the appreciation and for hedge purpose.
Therefore, to create wealth, the first step is to differentiate assets and liabilities.
Tuesday 22 January 2019
Two tips to achieve wealth growth: compound & leverage
Two tips to achieve wealth growth: compound & leverage
Everything is a process from quantitative change to qualitative change. The accumulation of wealth is not completed overnight. However, if the following ideas are borrowed, the accumulation of wealth can be accelerated.
1) The compound interest growth of wealth. Einstein said that compound interest is the eighth discovery of mankind. Warren Buffett once said that the accumulation of wealth is like a wet snowball sliding down a long hillside. As long as the hillside is long enough, the snowball will roll more and more.
2) The role of leverage. There is a leverage theory in physics. There is also leverage in the process of wealth accumulation. Example 1: You can buy an investment property worth $1 million with just a down payment of $200,000; Example 2: You can hire an employee who is able to create tens of millions of worth with only the salary of $200,000 per year; Example 3: If you post a message on the web and forward it through the circle of friends, the message will quickly promote a product to the world.
In addition, there are various financial leverages in various financial derivatives. Think about it, what skills do you adopt to grow your wealth?
Everything is a process from quantitative change to qualitative change. The accumulation of wealth is not completed overnight. However, if the following ideas are borrowed, the accumulation of wealth can be accelerated.
1) The compound interest growth of wealth. Einstein said that compound interest is the eighth discovery of mankind. Warren Buffett once said that the accumulation of wealth is like a wet snowball sliding down a long hillside. As long as the hillside is long enough, the snowball will roll more and more.
2) The role of leverage. There is a leverage theory in physics. There is also leverage in the process of wealth accumulation. Example 1: You can buy an investment property worth $1 million with just a down payment of $200,000; Example 2: You can hire an employee who is able to create tens of millions of worth with only the salary of $200,000 per year; Example 3: If you post a message on the web and forward it through the circle of friends, the message will quickly promote a product to the world.
In addition, there are various financial leverages in various financial derivatives. Think about it, what skills do you adopt to grow your wealth?
Monday 21 January 2019
What kind of investment can help you to generate passive income with low risk?
Though there is no loss in the amount of money that is saved in a bank, there is a risk of inflation that may destroy a person's retirement. Therefore, people are looking for investment to grow wealth and overcome inflation. Especially, an investment that is able to generate passive income to help people to become a millionaire. Usually, investment will also have different levels of risk. What kind of investment has good passive income with low risk? It may be noticed that banks are willing to lend money to clients to buy RRSP, houses or condos, segregated fund, and insurance. Therefore, these areas may be the right places to put money for passive income with low risk. Think about it, which one will be the best one to generate high return? I will find opportunities to discuss the advantages and disadvantages of these investment in the future.
Sunday 20 January 2019
Why are so many people afraid to become rich?
Most of people loves wealth. But why so many of them are afraid to become rich? To become a true rich person, you need to change yourself. Many people don't want to do it because they are afraid the followings.
1) Life has been like this for generations. Why do I have to be different from others?
2) I have a great job. I am not worried about food and clothing. I am very happy with current status. I don’t want to make more money.
3) Why do I have to try new things? What if I fail?
4) If the method is correct, why so many people do not follow it?
4) If I have money, others will think that I don't know how to spend money, neither enjoy life. If I have lots of wealth, others will say that I am unwilling to give or spend. I am ungenerous.
5) If I talk about money, others will say that my eyes are short-sighted and my mind is not ambitious.
6) I don't want to be in the same league as the capitalists who exploit other people.
In fact, if you pay attention to the rich people in the world, you will find that they gather wisdom and people together, do not fear risks, promote technological innovation, provide jobs and promote social development. They also generously fund social welfare such as health care, education, and other public welfare undertakings. So if you become a rich person, you will easily create lots of value for others and society. Therefore, only overcoming the above obstacles can we truly be ready to move towards the wealth. Both Donald Trump and Robert Kiyosaki also talked about their thoughts in "Why We Want You to Be Rich: Two Men, One Message" So, think about the question by yourself, do you want to be the rich?
1) Life has been like this for generations. Why do I have to be different from others?
2) I have a great job. I am not worried about food and clothing. I am very happy with current status. I don’t want to make more money.
3) Why do I have to try new things? What if I fail?
4) If the method is correct, why so many people do not follow it?
4) If I have money, others will think that I don't know how to spend money, neither enjoy life. If I have lots of wealth, others will say that I am unwilling to give or spend. I am ungenerous.
5) If I talk about money, others will say that my eyes are short-sighted and my mind is not ambitious.
6) I don't want to be in the same league as the capitalists who exploit other people.
In fact, if you pay attention to the rich people in the world, you will find that they gather wisdom and people together, do not fear risks, promote technological innovation, provide jobs and promote social development. They also generously fund social welfare such as health care, education, and other public welfare undertakings. So if you become a rich person, you will easily create lots of value for others and society. Therefore, only overcoming the above obstacles can we truly be ready to move towards the wealth. Both Donald Trump and Robert Kiyosaki also talked about their thoughts in "Why We Want You to Be Rich: Two Men, One Message" So, think about the question by yourself, do you want to be the rich?
Friday 18 January 2019
How to invest with $500 to get 25% annual return?
After reading some financial management books, someone may ask the following questions. How can a person buy a house for rent to earn passive income without enough down payment? How to ensure a person is able to earn passive income from stock market?
In fact, the opportunity to earn passive income is everywhere and needs to be identified. Once you have chosen the right investment, it will take some time to help you rich. The real rich are not getting rich overnight.
The following is an simple example that I hope will be instructive.
Many families have carpet floors. It takes about $500 to buy a brand new carpet washing machine. Actually, it can only be used 1 or 2 times a year. Therefore, lots of people do not think it is a good idea to have a machine home. The question is if you can invest in a carpet washing machine. If you buy one machine, you can not only use it, but also can rent it out. Through internet, you can inform so many people that you have a carpet machines for rent. It is convenient for others to rent a machine to clean their carpets at a low cost. At the same time, you are able to earn passive income.
Let's do a calculation. Assume a machine costs around $500. If your earns $25 for each rent, assume there are 5 people renting the machine every year. Then, you will have $25 X 5 =$125 income. The return of investment (ROI) is 125/500= 25% every year. You will not spend too much time on it. Therefore, the $125 is your passive income per year.
Is this an easy investment? In the future posts, I will find opportunities to share the knowledge to increase ROI. Even without the principal, you are still able to have passive income.
In fact, the opportunity to earn passive income is everywhere and needs to be identified. Once you have chosen the right investment, it will take some time to help you rich. The real rich are not getting rich overnight.
The following is an simple example that I hope will be instructive.
Many families have carpet floors. It takes about $500 to buy a brand new carpet washing machine. Actually, it can only be used 1 or 2 times a year. Therefore, lots of people do not think it is a good idea to have a machine home. The question is if you can invest in a carpet washing machine. If you buy one machine, you can not only use it, but also can rent it out. Through internet, you can inform so many people that you have a carpet machines for rent. It is convenient for others to rent a machine to clean their carpets at a low cost. At the same time, you are able to earn passive income.
Let's do a calculation. Assume a machine costs around $500. If your earns $25 for each rent, assume there are 5 people renting the machine every year. Then, you will have $25 X 5 =$125 income. The return of investment (ROI) is 125/500= 25% every year. You will not spend too much time on it. Therefore, the $125 is your passive income per year.
Is this an easy investment? In the future posts, I will find opportunities to share the knowledge to increase ROI. Even without the principal, you are still able to have passive income.
Wednesday 16 January 2019
How to invest without money?
How to invest without money?
Some people say that they have no money, and their parents have not left any family property. They are born poorer than others and think that it is impossible to invest except working. Indeed, there is no absolute fairness in the world. Some children have to face survival problems after come to the world. Some children are born with a golden key. However, on the other hand, the world is fair to everyone. Every day after each person comes to the world, he or she will be given $1440 per day. This is not a market-meaning currency, but time. Each person has 24 hours X 60 minutes = 1440 minutes per day. Money investment can have a return; similarly, investing time is good and rewarding. What to invest? Invest in your brain, learn financial knowledge, and study how the rich realize financial freedom, master the investment philosophy, plan the income of your job, and learn to start with simple investment. Although you do not have the appearance of a rich person, you must understand the connotation of the rich and learn the thinking of the rich.
Some people say that they have no money, and their parents have not left any family property. They are born poorer than others and think that it is impossible to invest except working. Indeed, there is no absolute fairness in the world. Some children have to face survival problems after come to the world. Some children are born with a golden key. However, on the other hand, the world is fair to everyone. Every day after each person comes to the world, he or she will be given $1440 per day. This is not a market-meaning currency, but time. Each person has 24 hours X 60 minutes = 1440 minutes per day. Money investment can have a return; similarly, investing time is good and rewarding. What to invest? Invest in your brain, learn financial knowledge, and study how the rich realize financial freedom, master the investment philosophy, plan the income of your job, and learn to start with simple investment. Although you do not have the appearance of a rich person, you must understand the connotation of the rich and learn the thinking of the rich.
Tuesday 15 January 2019
Which direction is the right direction to achieve financial freedom?
When I heard the book "Poor Dad. Rich Dad" for the first time, I thought it was a comic book and didn't care. After more than 10 years, I suddenly thought of the book "Poor Dad. Rich Dad", and I found it. This is also the introductory book for my financial freedom. This book is easy to understand without professional vocabulary of finance. It is worth reading. The book separates people to four quadrants: E(Employee), S(Self-Employed), B(Business), and I (Investor). How to get to I quadrant will determine whether a person is moving towards financial freedom. “With money, what to buy” is a simple example. If you buy a hen that is laying eggs, you don’t have to spend too much time, and you have eggs every day. On the contrary, if you buy fried chicken, you will have nothing after eating.
Please note: There are risks in the four quadrants. In the future blog, I will look for opportunities to discuss how to avoid risks. So please don't ask what if the hen is sick.
Monday 14 January 2019
What to buy with money?
The rich think: to buy assets; the poor think: to buy liability.
Example: The rich have money to buy chickens that can lay eggs. The poor use money to buy fried chicken or eggs.
Example: The rich have money to buy chickens that can lay eggs. The poor use money to buy fried chicken or eggs.
Sunday 13 January 2019
Why do you need financial freedom?
Financial freedom is a necessary condition for realizing freedom of life.
I was born in an ordinary family. It was in the early 1970s, and the material was not rich. At that time, the family's economic situation was average. When I was young, the impression was that parents often bought cheap things, such as discounted apples (many of them have been rotted) / pig heads (returning with bitumen/de-slurry. we had no money to buy meat at that moment), and the clothes were broken and worn.
In order to improve the economic situation, I decided to study hard and find a good job from an early age. Later, slowly, I got my degree from bachelor to Ph.D. I found a good job and made a lot of contributions to the society. I also have some money.The economic situation has also improved, but it is clear that most of the time is spent on my work. There is less and less time with parents and family, not to mention personal interests. At the same time, as incomes increase (there are ceilings), spending is also increasing, and this rhythm cannot stop.
One day, the concept of financial freedom was inadvertently touched, and the concept of passive income, also called investment income, was touched. Some people nicknamed after-sleep income, that is, even during your sleeping, the money can continue to enter the pocket. I feel that I have discovered a new aspect of my life. I don’t have to worry about finding a job/unemployment/labor ability. I don’t have to spend most of my time on work anymore. I have enough spare time in my life.
I will slowly share some experiences and experiences on how to achieve financial freedom.
I was born in an ordinary family. It was in the early 1970s, and the material was not rich. At that time, the family's economic situation was average. When I was young, the impression was that parents often bought cheap things, such as discounted apples (many of them have been rotted) / pig heads (returning with bitumen/de-slurry. we had no money to buy meat at that moment), and the clothes were broken and worn.
In order to improve the economic situation, I decided to study hard and find a good job from an early age. Later, slowly, I got my degree from bachelor to Ph.D. I found a good job and made a lot of contributions to the society. I also have some money.The economic situation has also improved, but it is clear that most of the time is spent on my work. There is less and less time with parents and family, not to mention personal interests. At the same time, as incomes increase (there are ceilings), spending is also increasing, and this rhythm cannot stop.
One day, the concept of financial freedom was inadvertently touched, and the concept of passive income, also called investment income, was touched. Some people nicknamed after-sleep income, that is, even during your sleeping, the money can continue to enter the pocket. I feel that I have discovered a new aspect of my life. I don’t have to worry about finding a job/unemployment/labor ability. I don’t have to spend most of my time on work anymore. I have enough spare time in my life.
I will slowly share some experiences and experiences on how to achieve financial freedom.
What is wealth?
Wealth is not how much money, but how many choices. If you don't need to spend time or just spend a small amount of time, the daily cash source is able to cover your expenses for the day, your life is free. You are rich.
Financial freedom knowledge sharing opening
Hello everyone, today I finally have time to apply for Blogger. In the days to come, I will share my financial freedom path with you, hoping to inspire everyone's financial freedom. If you have any questions, you are welcome to leave your thoughts. Thank you for your attention.
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