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The importance of a good financial vocabulary by Thierry PamphilePosted by SEP-SOLO-IRA-401k-ROTH on: 2007-01-03 14:22:46 in category:
Inflation Income & Bonds [ Print | Permalink / 0 Comment(s) ] by Thierry Pamphile Hi my friend Today you are going to increase your financial vocabulary and discover certain insights about the financial world. Before a define these key concepts for you and their implications concerning your cash flow patterns I'm going to throw them out into your mind . Here they are: Cash flow rate, Capitol gains method, cash flow gains method Now before you keep on reading make sure you understand what a financial statement is and how it works, otherwise you may read my article on financial statements or my article on management principles of a financial statement. Ok lets get the ball rolling... here are the key definitions and concepts. Cash flow rate is the amounts of cash flow you can earn form either one of the three types of income (Earned income, passive income and portfolio income). Please check out my article on type of income if you don't know what these type of income are. Now if you understand what these type of income are and their difference you will immediately understand and agree with the following statement : you can increase your cash flow rate at much higher speeds and rates with portfolio and passive income simply because you can apply leverage of debt and tax laws and corporate laws while with earned income your cash flow rate increase at a much slower rate and is always limited by your employer Capitol gains method. The capitol gains method is a key phrase I've coined to describe any type of formula or method which permits one to create a capital gain. You acquire a capital gain when you buy anything and sell anything at a profit. Now this method or process can be applied to any type of investment category be it business, real estate or equities in the financial market. Let me show you an example for any type of category Lets say you buy a IBM Stock at 80$ a share and you later sell it at 100$ a share at 100$ a share . You gained 20 $ per share for the stock. You buy a house for 50000$ repair it and sell it at 80000$ you've gained 30000$ You buy a almost bankrupt business for 100000 , you turn it around and sell it later 3 years down the road for 600000 $ you have gained 500000 $ IN essence you can create gains at profit in any category of the business and investment world. What you need to remember and understand is that the capitol gains method is a financial method or strategy that can be applied to any investment category. The Cash flow gains method is a key phrase I've coined up to describe any type of formula or financial technique which enable one to increase or create cash flow from any particular investment category Please not the word increase or create Now let's look at some examples from two investment categories. : 1 A business has a cash flow rate of 50000$ a year. To increase its cash flow rate, it creates a business project and finances it using debt form a bank. The project when up and running creates additional cash flow which when added up to the current cash flow of the business adds up to 90000$ a year. So we see here that the business uses bank debt to help crate a business activity which increases its overall cash flow on a yearly basis. 2 A person has a house which he rents out for 800 dollars per month. He decides to upgrade the house by adding a garage, adding a paint refresh inside and outside and upgrades the kitchen with new equipment. He then has the option of increasing his rent for 1100 dollars per month. Now you must be wondering how do the cash flow rate, capitol gains method and cash flow gains method all interrelate in THE BIG PICTURE ( your financial statement ) The cash flow rate, the capitol gains method and the cash flow gains method all have direct impact on the cashflow pattern of a financial statement. When integrated and used together a person can create and increase his cashflow rate at will and increase his net worth at will. He does not depend on and is not limited to cashflow from is earned income (job). With his or her knowledge about capitol gains and cashflow he can create more money with money using systems and information instead of going to work physically. What I'm sharing with you is very subtle so I'll say it another way. He creates money with his mind instead of going to work physically to work with fixed income....I'm sure my friend you've heard it already , and I'll say it for you again. We live in a information world and those who know how to acquire it and how to use it will be the ones that advance in this world! So what do you need to do? What do you have to do to get started N Below I've listed a couple of steps for you which you can do to get started 1 Save or get out of debt then develop the habit of saving to acquire a a financial base. 2 Educate yourself about the world of investment and business 3 Once you've chosen a category of investment or business which you are interested in then can start to plan how you will use the capitol gains method or cashflow gains method to make your money work for you 4 Make your money work for you by creating cashflow or capitol gains 5 Repeat the process until you acquire financial freedom (Cashflow from your assets exceeds your living expenses) Take action, keep learning and keep growing. ! My friend your knowledge about wealth is just the beginning to a greater life. Take care Thierry Pamphile The cash flow expert sharing financial principles www.alphacashflow.com P.S. Do you have family or friends who would also be interested in cash flow and money management ? Please send them to www.alphacashflow.com About the Author Thierry Pamphile The cashflow expert sharing cashflow principles |
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