I made up a new word: CASHFLOWNAIRE!
Cashflownaire: A person who has the positive cash flow of a million (or multi-million) dollar net worth.
As you probably know from previous posts, my financial strategy changed dramatically with the big 2008 market crash. My focus today is on monthly cash flow instead of wealth (net worth).
I don’t care about being a millionaire.
I do care about being a cashflownaire.
Having a million dollar net worth may, or may not, change your life. The reason why is the majority of your wealth will be locked up in your business, your home, or in other illiquid assets. It’s hard to eat your home equity unless you borrow it. It’s hard to eat the equity in your business unless you sell it. I sold my real estate company back in 2007 to unlock the equity trapped in the business. I sold the business for 7 figures and financed a significant portion of this sale providing a check for around $8,000 a month. Life was good!
Then the buyer defaulted and the checks disappeared.
My large net worth and monthly income vanished providing me with an opportunity to really think about what I wanted in life. Did I want to rebuild the business? Did I really want be a multi-millionaire? Did I want to work 7 days a week? Did I want to hire, train, and manage employees? Did I want the massive overhead and pressure of a large business?
Slowly but surely, I realized that I didn’t want to a large net worth. What I really wanted was the income from a large net worth-ie: cash flow. I wanted the $8,000 a month. This realization was life changing for me, because I no longer had to build a big business…read more
Around this time last year, I wrote an article highlighting ideas for paying for your child's college education. One of the best strategies to pay for college is to actually investing in rental real estate. This will be an update including the steps we’ve used ourselves.
1. When our daughters were very young, we decided to buy rental properties in order to fund their monthly college savings plans. We bought these homes with mortgages and our goal was to create $250 a month of positive cashflow for each of them after paying taxes, insurance, and the mortgage payment. This $250 a month would be invested into a brokerage account for their future college expenses. We followed this plan for years and over time their college savings compounded slowly. During this time the savings account for my oldest daughter grew to a little under $60,000. This included the $250 monthly contributions and the increase in market value of the various investments.
$250 invested per month turned into $60,000 in 16 years.
2. Last year, when my oldest daughter was a sophomore in high school, we used $40,000 of her college savings to buy a single-family rental home for cash. This home is within 2 miles from our home. It was a foreclosure and we needed to invest another $5,000 to make repairs, paint, and install new flooring. After completing the renovations, she was left with around $15,000 in her college savings account… read more