THE 4 PILLARS OF INVESTING Cash Flow: Module 1

THE 4 PILLARS OF INVESTING

Cash Flow: Module 1

TRANSCRIPTION

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The 4 Pillars of Investing

A transcription of

CASH FLOW

MODULE 1 2 3 4 5

Hi everybody, Andy Tanner here. I am so excited for Basic Cash flow, this is probably one of my favorite things to teach, I tell ya, I love the fundamentals and technicals. This one, just like those are, power packed, filled with information, let's jump right in.

You and I are going to learn how money is made up, down and sideways. You might be a little bit familiar with up, but down and sideways are new to a lot of people, especially sideways. We're going to talk about capital gains and cash flow, spend a little time on what the goals of. Of course, we're going to use the computer, so we can go out and golf while we're making money online or whatever. We're going to learn vocabulary, notice how I always put a bullet in for that? Every class I teach, I try to remember the vocabulary words that might be new.

If you took Fundamentals with me and you spent that time with me, you probably have already noticed that you're hearing vocabulary words more often, CNBC, The Wall Street Journal with your advisors and it's going to get better and better from here, I tell you that. We invest based on criteria, not gut feelings so we're going to learn more important cash flow criteria right here and then we're going to discover one of Warren Buffet's favorite strategies which is also one of mine. I almost hesitate to say favorite strategy because I don't want to convince you of one strategy over another because I'm about education, not advice. Is that a good segway and disclaimer, or is that a good segway? I thought it was, planned it that way.

This disclaimer is important, don't treat it like the flight attendant taking off before a plane saying, "Hey, you need to pay attention," you do because all investing in the Securities market involves risk, yes it does and if you make a decision to trade, guess what ? same as last time, that's your choice and I'll be responsible for my trades too. If I make money it'll be my fault, if I lose money it'll be my fault, not yours and that's the way it'll be with you.

This is for education only, it's a basic course, it's not designed to give financial, professional advice and it certainly isn't to persuade you to trade any certain instrument or any instrument at all, or

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any type of option or one style over another, even in Security. Now, why am I hammering this so hard at this particular time more than normal? Well, I'm going to show you some of my trades and generally I don't show a lot of my trades, I really don't but I think it is very beneficial to the educational process in this instance to show demonstration of how it works in reality, not theory.

So I keep the trades very basic, I think at this level if a person can learn to make an extra 500 bucks here and another $1000 in a month they are pretty thrilled and then they can build on that from there. So understand that I'm not recommending you trade like I trade and please do not construe any of the instruments I use in this education as a recommendation, I just want to show you a process. So if that's understood, and I think it is, investing has risks, it's for grown-ups, not kids, then off we go, we can get rolling right in here.

Where are we on the continuum, let's take a look. Well I'll tell you what, you may or may not have started here, but if you did start here you're no longer in ignorance now, I'll tell you that. You know what Fundamentals are, you know what Technicals are, Phase 0, let's check it off the list, you're in Phase 1. We've done Fundamentals, we've done Technicals, now we're going to do Cash flow, we're going to do Strategies, Vocabulary and in this particular class I'm going to work on your context much, much more than in the first two; we're really going to work on that because we're dealing with cash flow.

You know what's cool? We are almost through Phase 1, God; it went fast, didn't it? In fact, there's 4 classes here, this is #3 of 4, so you are 75% of the way there after this session and then you can go to Phase 2. And you know what the good news is? After Phase 2 is Phase 3 and guess what that's all about? That's about actually making the income, practicing it, getting the experience and actually getting some money in your hands. So I'm excited for you, all you do, keep moving forward, it's kind of a fun journey, has it been fun for you? It's fun for me, I hope it's fun for you because I love teaching it, a lot of fun.

Where are we at here? Cash flow. Got this one kind of under our belt, got this one under our belt and now with the cash flow we'll do Risk Management next time. What are your goals? People will, this is driving me crazy!! Can I vent? No, we don't want to spend our Christmastime venting, but I tell you what, they call or they email me or they Facebook me, or they Twitter and they say, "Andy, should I buy some gold or not? Should I buy apples, is it too high or not," and I'll say, "Well, I can't give you financial advice, I'm just a teacher, but I'm curious, what are your goals?" "Well I don't know, I just want to make money." Well, let's not just be like a little kid, lets be like a professional, what kind of money do we want to make? What is weak? What is strong? You look at your income statement and your balance sheet and you know that some things will affect your net worth like your capital gain; some will affect your cash flow like rent, right? Some are for

The 4 Pillars of Investing | Cash Flow : Module 1

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insurance, well let's look at this ? a lot of stock trading is buy low, sell high, buy low, sell high, buy low, sell high, is there anything wrong with that? Absolutely not, it's building your net worth, if you're doing it right; killing your net worth if you do it wrong.

There is a very important reason to make this distinction of 401(k)'s, some have mutual funds they dividend, but they usually reinvest it for more so that's kind of what growth companies do, that's what they growth fund is going go and it's all about growth, not cash flow. You know what? I would like to offer you the challenge to think about this, to think about money you could spend today where financial independence, you start getting a taste of it now see rather than wait in five years and making this thing such a dream in the future that may or may not happen. Let's get a taste of that cash flow we can spend right now and wean ourselves off a job.

Let's not say, "Oh, I'm going to retire in ten years, that's it, I'm done." Let's just wean ourselves off it, let's start getting passive income now and more and more passive income where we're relying on the job less and less and less over time we wean ourselves off the job, I think that's what I'd like to teach people to do, I think that would be really cool if they would. Hedging we will do next time, let's not spend our precious time talking about that because we're going to have plenty of time to talk about that later.

Let's talk about cash flow and let's work on our context because I would hate to show you a lot of cool techniques and not have it in the proper context. Okay, here's the person's problem here baby, it's this number ? gotta eat, gotta eat, gotta have a roof on our head, gotta feed those kids, gotta clothe them and this right here, grab a piece of scratch paper, Post-It note, whatever, write down your number. I know you did the assignment, I know you did a Fundamental Analysis, I know you know what that number is for you; write it down on a Post-It note and stick it on your mirror because that's the problem we got to solve here, it doesn't go away on it's own.

A lot of people use a job to solve this problem and I think let's change our mentality from one day I don't have to go to work anymore and I'll have to quit and I'll have all this money that I'll just use, let's start right now, let's get a taste of this. Let's go out and let's buy some stock and maybe let's get a dividend, there's a lot of great stocks to have a dividend, Verizon pays a big dividend for example; no recommendation, just an example whoo! Gotta watch that legal stuff, holy cow.

Let's go out and make a dollar for crying out loud, okay? And let's just get a taste of what it's like to make income somewhere other than a job, let's start making that transition, little by little and then let's make $10, and then let's make $100, and then let's make $1,000 and each month let's try to make a little bit more in cash flow or income from our assets and less from our job

The 4 Pillars of Investing | Cash Flow : Module 1

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until something cool happens, until you have a passive income above your expenses, that's what financial independence is.

Financial independence isn't have a million dollars, it's not having $10 billion, it's this, can you live independently? Do you have enough asset, do you have enough payment coming from your assets that you can live, whoo, let's breathe easy on that, isn't that a good feeling? Imagine how that would feel to simply have the assets to produce the income where you didn't have to worry about money anymore; then you can focus on the important things in your life. Hey! This is traditionally what people think about when they think about wealth building, they think million dollars, 401(k), build a million dollars, when I'm 65 I'm done.

Well, I don't know, there's a lot of things that go into that. This over here on this side has to do with the skill of making these assets work hard and if you have a skill that makes the assets work hard, this number gets bigger. So I like the idea of the different pathway maybe as we talk about cash flows to think about hey both numbers are important, do we want a million dollar net worth? Sure we do, but we also want a cash flow above our expenses and let's say rather than setting a goal of saying I'm retiring at 65, come what may, let's set a goal of saying hey, as soon as I have an income that is greater than my expenses that comes from assets, then I'm done and not a day before. That way, you might even be able to retire early.

Now, it helps me as I get in these sessions to think about why you and I are doing this. I know you have important reasons for being here, and they are all correct. In fact, whatever you feel is right is going to be right for you. Maybe it's time with family, that's a big one for me, or maybe it's travel, that's a huge one for me, leisure, you probably want to give some money away which helps drive you forward. And so as we go through these classes together, let that dominate your mind, but you see all this stuff, this travel, this leisure, this family time guess where it comes from ? it doesn't come from net worth, it comes from cash flow. Can you afford to do this each month? Do you have enough money coming in monthly that you can do all this stuff? That's the big question. So let's work on cash flow and net worth.

Let's also take a look at our current plan; let's poke some holes in it, if we can. Let's do a contrast as we think about cash flow, what's the wrong way to go about it? Well I don't know if there's a wrong or right way, I don't think I'm allowed to label one as good or bad. We're not going to advise you there, but we will ask some questions about the current plan, be very honest with you and this series you and I are going through together ya'll, I want to hold your hand through it and I'm going to ask you some really interesting question.

The 4 Pillars of Investing | Cash Flow : Module 1

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