Knowing which income to pursue and which to give up is one important aspect you need when it comes to managing personal finance. Passive income on the other hand is, any income that will flow into your bank account whether you work or not. Some example of active income are: your job, That means your income stops the moment you stop working. There are 2 types of income in this world, active and passive income.Īn active income is, any income that requires you to be physically involved. Differentiate between Active and Passive income Whatever your dream is, just set it and start striving to achieve it. They can be as small as “I want to be the manager of my department in the next 5 years”, or “I want to get married and start a family within the next 3 years”. Size of dreamĭreams need not be big as in “I want to be a billionaire by age 50” or “I want to be the first person to live on Mars”. It will be your motivation and helping hand to keep you moving. Whenever you get pushed around by life, having a down day or hitting walls when pursuing something, you should always look back at your dream. Why you want to achieve financial freedom? Why are you pursuing a certain cause?
This dream is the metaphor of your “why”. Reason for having a dreamīy placing a dream at the start of the game puts a goal for you to pursue in the game. But the point he tried to convey was that we humans are nothing but zombies if we don’t have any dream.
There was a joke on people without dream by Steven Chow in his movie “Shaolin Soccer” where in one of the dialog he said that “If we don’t have any dream in life, we’ll look like a salted fish”. People without a dream doesn’t have the motivation to change, thus will always stay within their comfort zone. Having a dream is important if you want to go far. Rules such as the requirement to pay off all debts before eligible to enter the fast track, or where we need to have cashflow that is more than the total liabilities (to guard against foreclosure yet still owning the assets), or that passive income should be double our current expenses as opposed to the original rule of exceeding the current expenses, etc. Over time, Nick would impose more rules to make it strict. We also learned about how the market can make or kill our ideal investments. Things like how we behave, how we view money, how much we understand between assets and liabilities, and between active and passive income. There are a lot to learn from playing the game.
To let us understand in depth about how to be better in managing personal finance, we need to get started with playing cashflow 101.
Having learned from Nick on how to save money and the concept of wealth creation previously, we understand the high level concept and road path to take to have a better personal finance and achieve financial freedom.
And I want to hear first hand on what had you learned so far. “And I would like you to discuss among yourself on what can be done better to improve your strategy and thinking.
“As usual, I would like each and everyone of you to reflect and note down what went well during the game.” said Nick in a very strict voice. Nick knew that Richard had some good result in his stock investment, Joanne had made some result in her affiliate marketing business, while Alan just got a freelancing job request through an existing client’s referral. Nick is very pleased with the performance of his apprentices and couldn’t wait to start their debrief session together. When Ricard finally won the game, both Alan and Joanne just got out of the rat race. Richard had been managing his personal finance so well that he got out of the rat race while his two friends had only build half the required passive income to get out of the rat race. While Alan and Joanne also improved, they are not as obvious as Richard. Nick noticed that Richard had improved greatly in his cashflow 101 game. Instead of the usual lecturing or advising, Nick had them play a few rounds of cashflow 101 board game. One Saturday morning, Richard, Alan and Joanne completed their morning ritual with their mentor, Nick, and were having their lesson on how to be better at managing personal finance.