Your Financial Independence Goal

Here is the picture of financial independence with your income statement on the top and balance sheet on the bottom:

• The income statement represents all income and expenses ... anything left over can be used for saving, investing, Toys R Us.
• The balance sheet includes everything you own, Assets, everything you owe, Liabilities, and the difference between the two, Equity. If you own a car worth $10,000 and owe $2,000 on it, your asset value is $10,000, the liability is $2,000 and the equity is $8,000.

In order to become financially independent, it is necessary to buy enough cash flowing assets such as rental property, dividend paying stocks and pinball machines, so that the cash "flowing-in" is equal to or greater than monthly expenses. A person with $2,000 in monthly expenses and $2,000 in monthly cash flow is financially independent.

The ellipse above connecting the income statement and the balance sheet represents the cash flow from cash generating assets. It is important to have the ability to calculate the rate of return on these assets. An asset that delivers $10,000 a year in cash flow and requires an initial investment of $10,000, has a rate of return of 100%. A similar asset that delivers $2,000 a year in cash flow and an initial investment of $10,000 has a rate of return of 20%. All else equal, assets with higher rates of return will get you to financial independence faster.

And now, a list off cash flowing assets:

• Rental Property
• Dividend Paying Stocks
• Warren Buffett Style Stocks That Deliver Consistent Capital Gains
• Covered Call Options
• Royalties
• Systematic Business Models

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To learn more about cash flowing assets such as Systematic Business Models and Warren Buffett Style Stocks, pre-order Building a Small Business That Warren Buffett Would Love, available at Amazon.com or BarnesandNoble.com.

Building a Small Business That Warren Buffett Would Love,available at Amazon.comorBarnesandNoble.com.

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