Building on the wealth discussion from previous installment, the two methods for growing wealth are cash flow and capital appreciation. Cash flow comes from your business and from certain investments that pay regular distributions. Capital appreciation comes in the form of equity growth.
Cash flow should be generated first and priority given to strategies that enhance this. Many people employ a practice of: make money, spend money, invest (what’s left). Brad teaches that a better approach is to make, invest, and then spend (just the earnings). This requires discipline and commitment, but provides a great deal of security. There are lots of ways to accomplish this and consulting with a financial advisor to tailor this approach to your circumstances is a great idea.
Capital appreciation comes from growth in value of long-term assets like real estate and stocks. Brad recommends that investing for capital appreciation is done AFTER a solid cash flow base is built. Further the cash flow, “spun off” from business and other distributions, is used to fund the acquisition of capital assets. Carefully building a balanced portfolio of both cash flow and capital appreciating assets is a wise approach to building wealth.