JUST WHAT IS A CASH FLOW GARDEN?

Some of my readers have asked me why I named this blog "Cash Flow Garden." A short answer is because I believe that the central issue in developing financial independence is not assets, it's cash flow. Its about replacing the cash flow derived from work (trading time for dollars) with cash flow from more enjoyable pursuits, like investing.

Over 20 years ago when I enrolled in a program to earn my commercial real estate designation (CCIM), one of the first things the instructor emphasized was that any investment could be evaluated based on a series of cash flows. That message stuck with me as I helped clients plan for their retirement. When I used the financial planning methodology for calculating the funds needed for retirement, I had to make a number of assumptions such as life expectancy, average return on investments, inflation, etc. The final result was dependent on my making those assumptions of which were little more than educated guesses. As an example, consider the fact that a recent article I read calculated that a couple earning $50,000 a year would need $1.75 million for a "comfortable" retirement. Now ask yourself, what couple earning $50,000 a year has a prayer of accumulating $1.75 million? Stated another way, what couple with $1.75 million worth of investment assets will be satisfied with $50,000 a year?

When I read Robert Allen's book on "Multiple Streams of Income", I reached the conclusion that cash flow from a wide variety of sources was the actual key to financial independence. I envisioned that the process was something like planting a garden from which cash flow could be derived. Like a garden, some crops were dependable (almost anyone can grow zucchini but sometimes you can't even give it away). Other crops are more valuable (every one likes home grown tomatos but the yields often vary due to weather, pests, and soil conditions). Still the garden needs a variety of crops to produce a reliable food supply.

I would like to wish all of you a happy Thanksgiving. Of the many things I am thankfol for, I appreciate my clients, past present, and future which are a part of my cash flow garden. As a side benefit, I have been blessed with some very valuable friendships from this group. Think about your financial independence and call or e-mail me if I can help you construct your own cashflow garden.