The big difference between saving, investing and trading is perhaps the time-frame with which we do it. Trading we do for a quick return. Saving is short to medium term, with liquidity and safety of capital as main considerations. Investing is medium to long term and ultimately building real wealth.

 If you have been reading this blog for some time, you are probably sick of hearing this, but I am going to say it again anyway! We always start off by investing for income. That is very important.

 Real financial freedom means that the income I derive from investments are equal to or more than my salary. At the least my portfolio income should be enough so that I can maintain my standard of living without working.

 I am under the impression that the majority of the population does not understand the above. Yes, they know the words, but they don’t realise the power of the idea. The moment you start deriving income from your investments, your life changes.

 Let’s use an example.

 I have a cheap flat on which I have a monthly profit of R800 per month. Normally I would pay the full R800 into the bond and shorten my repayment period. This month I had a lot of unexpected expenses and I had a choice – I could either withdraw money from a savings account or I could use some money from the rent. I decided to use R500 of the rent money and my budget is in balance again. I know, I know, it is small amounts! But would you not agree that it is nice to know I have that available? And repaying the bond at a much quicker tempo does not affect my own cash flow!

 But there is more. My wife and I have a life policy that covers the “death costs” of this flat. If either of us were to die, the flat will be fully paid up and the total rental income available for whoever inherits it. The implication is that we need less lifecover, since we don’t have to provide for income through capital! If either of us become physically disabled, the flat is paid for.

 You see, what people don’t understand about the idea of “cash flow first” is that it means freedom, but also SECURITY. Imagine the time when I have 10 properties fully paid up and I receive all the rental? And you know what? Once you are in a profit situation with a property, repaying the bond is not so difficult any more!

 Let me conclude with two things. First, I could say a lot more about the importance (emotionally and financially) of creating a cash flow first. The above will suffice for now.

 Secondly, if you want to know how YOU can invest in property safely with very little risk, please contact me. My personal e-mail is pietm3(antispam)@yahoo.com – just remove the brackets and everything in-between.

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