Notes on Cash Flow 101

Financial freedom is getting out of the rat race. It is said the poor spend every penny they make, have no assets, instead have liabilities. The middle class on the other hand, while earning more than others, also accumulate more debt as they become more successful. A pay raise qualifies them to borrow more money which they usually use to buy personal items. As income increases, so does personal debt. This is what they call the rat race.

I would say I am just in between poor and middle class, deep into the rat race. I found it refreshing therefore to see things from a different perspective. Though the terms assets and liabilities are not new to me (being a CPA), it was the first time I heard assets being described as something which puts money into your pocket, liabilities as something which takes money out.

The key to getting out of the rat race is having passive income. It is income derived from assets like real property, businesses, among others, without you exerting so much effort. It is different from earned income which is income derived from labor, income which you have to sweat for. As soon as you have more passive income than your regular expenses, you can say you are financially free.

To get passive income one will have to take risks. But, as they say, in life, nothing really is without risk. Only when there is too much risk do we say it is risky. The point is, just depending on our pay check for the rest of your life may just be as risky as taking a chance at improving your asset column and finding that passive income which will free you financially in your later years.

These are my notes on the Cash Flow 101 workshop I attended last Sunday. To learn more, visit this page. You may also want to attend the workshop yourself. It is being conducted by the official Cash Flow 101 workshop provider in the Philippines once a month. I will be glad to post the details here as soon as it is available.