Cash Flow

Don't diversify. Take control of your money and focus your investments. During this current financial crisis I took a few hits, but my wealth remained intact. That is because my wealth is not dependent upon market values going up or down (a.k.a. capital gains). I invest almost exclusively for cash flow.

For example, my cash flow decreased a little when the price of oil came down, yet my wealth is strong because I still receive a check in the mail every quarter. Even though the price of the oil stocks, capital gains, came down, Fm not worried because I receive cash flow from my investment. I don't have to worry about selling my stocks to realize a profit.

The same is true with most of my real estate investments. I invest for cash flow in real estate, which means every month I receive checks—passive income. The people who arc hurting today are real estate investors who invested for capital gains, also known as flipping properties. In other words, since most people invested for capital gains, counting on the price of their stock investments or their home to go up in price, they arc in trouble today.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Rich or poor, educated or uneducated, working or unemployed, we are all involved in the game of cash flow. The difference, however, is that some are playing the game, and some are pawns in the game.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Today, there are many great products, services, or businesses that could save the world, but without cash flowing from the consumer to the rich, those products or businesses are not funded. If you are going to launch a new product or start a new business, you must be very aware of cash flow. If your business only provides enough cash flow for you, chances are that your business will not attract investors or grow.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

People who play the game of capital gains are often hoping the price of their home will go up or that the stock market will go up. However, someone who invests for cash flow does not really care if the market or the price of a house goes up or down.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Rather than use net worth, I use cash flow to measure my wealth. The money my investments bring in every month is true wealth—not some perceived notion of value that may or may not be true.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Patiently, rich dad reminded me of the differences between capital gains and cash flow. It was a good reminder. Every time I flipped a property, I was investing for capital gains. Rich dad informed me that the tax laws were different for capital gains and cash flow, just as they are today. "Invest for cash flow were rich dad's words. "Remember the lessons I taught you years ago from Monopoly. Investing for capital gains is gambling."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

"Good," said rich dad sternly. "Don't ever forget that. Invest for cash flow, and you'll never worry about money. Invest for cash flow, and you will not be wiped out in boom and bust markets. Invest for cash flow, and you'll be a rich man."

"But," I began, "it's easier to make more money with capital gains. Real estate prices are skyrocketing. Finding investments that create cash flow is hard."

"'I know," said rich dad. "Just hear what I am saying. Don't let greed and easy money interfere with becoming a rich and financially wise man. Never confuse capital gains with cash flow."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

I would have made a lot more money if I had invested for capital gains, and if I flipped real estate. It was hard to invest for cash flow while everyone else was investing for capital gains. In 2009, however, I appreciate rich dad's lessons more and more. I know why he insisted on teaching me to focus on cash flow and not to get sucked into the frenzy of buying low and selling high.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

There are a number of reasons why most people invest for capital gains, and not cash flow. Some of the reasons are:

<ol>
<li>Most people do not know the difference.</li>
<li>When the economy was growing, it was easy to play the capital gains game. People automatically assumed their house and stock portfolio would go up with inflation.</li>
<li>Cash flow investing requires more financial sophistication. Anyone can buy something and hope the price will increase. Finding cash-flowing deals takes knowledge of both potential income and expenses, and how to project the performance of the investment based on those variables.</li>
<li>People are lazy. They live for today and ignore tomorrow.</li>
<li>People expect the government to take care of them. This was my poor dad's attitude, and he died a poor man. For my poor dad, it was easier to expect someone else take care of him. Today, there are over 60 million Americans, my fellow baby boomers, who are about to follow my poor dad's footsteps.</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich