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Recently I played a board game with my mentor. It was Cashflow 202 from Robert Kiyosaki, the author of book Rich Dad Poor Dad. This board game is almost same with the normal monopoly game that we played. However, Cash flow 202 is much more realistic because it is included some of the real life case about how we spend money, make money and invest money so we can be financial free in a certain time. Besides that if you are not lucky enough, maybe financial disaster will happen to you too such as bankruptcy. This is why I love this board game very much because it just likes what happen in our life.

Did I learn some thing from Cash flow 202? Yes I learn something. In this game there are 2 words that always appear - Capital Gain and Cash flow. It seems like both of them are playing some important role in achieving financial freedom.

From the game, I learn that if we want to be financial free, then we must build some kind of passive income source to support our life and this is where “CASHFLOW” is paying its role. So to get this kind of cash flow, we must invest or start a business. However, I learn that most of the time, those investments and businesses need money. The bigger the investment, the more money you need to put into. In order to invest, we need some capital and if you want to involve in more investment, then “CAPITAL GAIN” is important to you. In conclusion, to be financial free, you must build your cash flow by investing. You need money to invest and then you must learn capital gain to increase your capital.

Cash flow

In personal finance, what we always learn is how to manage our money or in other words, how we control our cash flow. We must learn and know how to control the flowing of our cash. If our cash flowing out more than it is flowing in, then we might in financial disaster. That’s why we learn about personal finance, learn how to manage our cash flowing so we won’t fall into the disaster hole but instead have a brighter future or retirement.

However, if you want to be financial free or retire as early as you can, then you must concentrate on how to build a cash flow source that we called passive income. Then your focus will be totally different. Everytime you invest, you must learn and calculate out how much of positive cash flow(flowing in) will this investment brings to you. Besides that, you also need to calculate out what is the rate of ROI( Return of Investment) for an investment. Beside that you also must analysis and consider a lot of factors before you invest.

Below is some of the example of investment that will bring you cash flow:

1. Real Estate - Invest in property, rent out for people and get passive income from them.
2. Business - Invest in a profitable business and get a profit sharing at the end of every month or in certain period.
3. Anything that come with interest - Invest in an investment and then it will generate some kind of interest to you. For example, CD and FD.

Capital Gain

Do you ever come across a profitable investment that you cannot afford simply because you are not enough money? For example, today is Tommy’s lucky day because he able to find an investment opportunity and he is 100% sure that this investment will generate money to him. However, he found that he needs $10,000 to invest in this investment and he only has $5,000 with him. So Tommy feels sad and down and thinks that this kind of investment is for those rich people.

Yes, in life, this kind of situation always happens. However there is solution for this - Capital Gain. Besides invest for passive income, we also must learn how to invest for capital gaining, so we can afford a bigger investment or more investments which will bring more income for us. Don’t worry, this “capital gaining” skill can be learned by reading and from experience.

Below is some of the example of investment that has the effect of capital gain:

1. Stocks are the most common tool that you can use to improve your capital.
2. Forex is another potential tool where you can benefits from the leverage which allow you earn more money with less investment capital.
3. Real estate also a choice by flipping a property
4. Business. Invest and make your business become profitable and increased in market value. Then sell it out for a big money.

Conclusion: Cash flow VS Capital Gain, which one to go first?

It seems like both Cash flow and Capital Gain is important right. Which one to go first is all depending on your plans and strategies to financial freedom and also your current financial status. If you are a teenager who just start working with low paychecks, or you don’t have any saving for investment. Then you might concentrate on Capital Gain investment which helps you growing your capital so you can afford more investment. So your goal should be how to make every $100 become $1000 or more. If you lucky enough, you might find some cash flow investment that doesn’t need big amount of capital. On the other hand, if you well manage your money and you are having plenty of extra money to invest, then you might consider those Cash Flow investments. It is really all depends on your plans and current financial status.

The special of Real Estate Investment

Real estate, I found that this really a special investment tools that you and I should pay to. So far what I found is real estate is one of the investment that contain both “cash flow” and “capital gain” features on it. For example, you bought a rental property with $100,000, you rent it out and every month you get a $300 of passive income from renting. However, after 2 years, this property goes up in value to $150,000 and you sell it and get $50,000 of profits in capital gain. The good news is you can leverage on mortgage, maybe you just need to pay $3000 for down payment and get a mortgage on the balance. So your ROI is 16.7%. Not bad. This is the special benefits of Real Estate investment.

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