The Stock Market Cash Flow. Andy Tanner

wait for a season when you focus on your financial education, but you’ll have more money than you will ever be able to consume by yourself. Your greatest challenge might be figuring out how to give your excess money away. This is where Bill Gates is today. He left Microsoft because he needed to devote his time to the Bill and Melinda Gates Foundation and figure out the most effective ways to give his money away. That’s not a bad place to be!

      Chapter Summary

      Let’s review some of the important points of this first chapter:

       1. We can discover new things in different ways than we learned in school.

       Learning does not need to be rigorous or difficult. In fact, learning is something our minds can do naturally and easily when we participate in the process. Discovery is a wonderful feeling; learning should be fun.

       2. Context is about how we think.

       We can often learn about our context by paying attention to the questions we ask. Content is about the details, the how-to of a given task. Context is about the big picture, the why we are doing the task.

       3. Use The Education Continuum.

       One of the most common mistakes to avoid is confusing awareness with proficiency. Set your educational goals within the context of The Education Continuum and know where you are in the process. It doesn’t matter where you are on the Continuum at any given moment. It only matters that you are honest about where you are and that you have a plan to continue moving toward proficiency.

       4. Learn by teaching.

       As you continue through the remaining chapters of this book, consider doing so with a pencil or pen and mark the sections that are particularly important to you and write down what you are learning so you can build on it as you go. Teach the things you discover to other people. This will help you remember more than if you simply read the book. Remember, you don’t need to be an expert to share the things that you are learning.

       5. Educational goals enable us to meet money goals. Money goals help us achieve lifestyle goals.

       To improve your standard of living, you can set lifestyle goals. Those goals will have more meaning when you actually research how much money it will take to purchase your lifestyle goals. Once you’ve established your money goals you can look at different ways you can create that money by increasing monthly cash flow rather than by just saving and scrimping or loading up credit cards. You can set some educational goals even after you have graduated from high school or college. Educational goals should be specific ways of learning how to get more cash flow so that you can achieve your money and lifestyle goals.

       6. Seek out and find mentors.

       As you focus your mind on investing, you’ll begin to see things differently. You’ll discover that some of the people you know and the people you need will become your allies. You will be on the lookout for mentors who can help you, and you’ll be eager to invite them into your circle. In the process, you will also become part of their circle.

       7. Money comes from financial education.

       Always remember the parable of the orange tree: Don’t be an orange hunter, be an orange tree grower. Focus on your educational goals, and the money goals will follow naturally.

Chapter Two

       Paper Assets in Your Wealth Plan

      Building wealth is a matter of learning to buy or create assets intelligently and is part of a deceptively simple plan:

       1. Get financial education.

       2. Buy income-producing assets.

       3. Build cash flow.

      I’m a fan of Dr. Stephen Covey’s The 7 Habits of Highly Effective People. If you’ve read the book, you might recognize that the above sequence of steps is a demonstration of at least two of the seven habits: begin with the end in mind, and put first things first. (If you haven’t read the book, I highly recommend it. But remember: Don’t just read it, study it.)

      So if getting financial education is your first goal, then what kinds of things should you begin to study? As a serious student you might begin by studying all of the four income-producing assets classes:

      Please understand that different assets and asset classes have different advantages and pitfalls. It is vital to find a combination of assets that will suit your goals and strengths. You might find that you are best suited to focus on one type of asset, such as stocks. Maybe you have what it takes to be successful in business. Perhaps you’ll find that real estate is what revs your engine. Or maybe you want multiple streams of income from all the assets classes. There is no right way, no one-size-fits-all answer, no magic bullet. The way that works for you might not work for your neighbor. But the more you know, the better equipped you’ll be to put together the plan that will work for you.

      To figure out what is best for you, you need at least a basic familiarity with all the asset classes. Only then can you find which combination will take you to your dream. Once you understand them, you can start to visualize how they will fit in the assets column of your balance sheet.

      Let’s get started by taking a brief look at the four asset classes.

      Businesses

      “Business” is a huge subject, but let’s narrow it down to just two business topics: taxes and leadership. These are the two areas that most affect business as an asset.

      The top financial liability for almost everyone is taxes. This is important to remember as we discuss creating a business as an asset. Growing up in the United States, I was taught about the important ideals of freedom: freedom of speech, of religion, and the right to own property.

      I’ve heard it said that you can measure the amount of freedom you enjoy by how much of your stuff the government allows you to keep. I have a friend who likes to say that taxes are just a way for government to legally seize our property. If you choose not to pay your taxes, the government can seize the money from your bank account. And if you don’t have money in your bank account, the government can seize your property.

      If you’re like me, your goal is to keep as much of your own money in your own pocket as possible. Reducing your tax burden is a good place to start taking positive action to make this happen.

      Many countries offer tax structures with advantages and incentives to business owners. If you have not already done so, pick up a copy of Tom Wheelwright’s book Tax-Free Wealth and you will see that the tax man is much kinder to educated business owners than to average working citizens.

      Leadership also affects business as an incoming-producing asset. There are scores of computer programmer-types in the world, but Bill Gates of Microsoft and Steve Jobs of Apple stand out as exceptional leaders. They both left their university schooling to focus on their businesses.

      Robert often talks about how “A” students wind up working for “C” students, and I’ve seen that in my own life. I’ve even lived it. It’s funny how little grades and report cards matter once you’re out in the real world. Leadership is a commodity that’s much more valuable, and “A” students don’t always make the best leaders.

      Business is about organizing people and their talents. If you are a good leader, then business might be a great place for you. If you are a strong leader, then owning a business allows you to leverage the efforts of other people.

      Think about this: An average person works eight hours a day, five days a week, 50 weeks a year. That’s about 2,000 hours each year. Now let’s suppose that as an employer you hire 100 people to work for you. Suddenly, you have 200,000 hours of effort working for you. You are able to magnify your efforts in a way that’s impossible for a single person to accomplish on their own. Imagine what you