When it comes to investing in the real world there are often two schools of thought:
- The conservative approach- which involves consistent work, save money and plan for the future with qualified plans and appropriate insurance in place. This plan takes time and requires one to be extremely diligent however it does put a lot of stress on maintaining a consistent income from the job market. In essence all the earnings which come from your job are being divided into different buckets. One is also in the highest tax bracket and that does pinch your pocket. With the current state of affairs maintaining your job can be a challenge due to planned layoffs and changes in the job market. The investment vehicles recommended with this approach usually are netting 4-7% rate of return to an individual which may not be good enough to keep up with the rising cost of living.
- The Cashflow approach – which involves controlling or acquiring assets to create income via cashflow. The assets can be real estate, notes, other financial instruments like options, forex or running a successful business. The cashflow from your investment activities provides the needed financial backbone to support the lifestyle one wants to achieve. This approach does require a SOLID foundation in financial education and experience in managing debt, using it as intended and not being over leveraged. This a skill one needs to develop over time with practice and being in the company of successful mentors. The rate of return with this approach can be much higher but does involve taking risks, asking for help, being entrepreneurial and being diligent with debt. The risk here is without a proper understanding of the asset and managing it properly one can end up in a worse financial situation than when you started. So education is key!!