Cash flow is more valuable than we give it credit for. Lately times have gotten tough and the passive income and cash flow from my businesses has really saved me.
0:00 – Introduction
0:40 – About 3 years ago I achieve pseudo financial freedom
1:14 – My unfortunate circumstance
2:00 – Passive income gave me time and allowed me to avoid a dire financial position
3:02 – Imagine if I was negatively geared instead
4:30 – Life doesn’t always go to plan and our investing needs to take that into account
5:38 – Potential “Downside Life Risks”
7:00 – When investing always think about your cashflow position
7:58 – Passive income gave me 6-12 months to solve my financial problems
9:52 – Cash flow is more valuable than we give it credit for
11:16 – Cash flow is totally under rated
Passive income and positive cashflow can be extremely underrated when it comes to investing in property, investing in businesses and stocks in Crypto, whatever it may be that you’re investing in. And recently I’ve experienced how valuable passive income can be in your life. And so in today’s episode, I want to talk a little bit more about the value of passive income. Talk about how life doesn’t always go to plan to get you thinking when you’re investing in your next property or whatever it is that you’re looking to invest in next, potentially looking for that passive income opportunity. Hey, I’m Ryan from on-property, helping you achieve financial freedom. And about two or three years ago, I achieved what I call pseudo financial freedom. So it was financial freedom in that my businesses were earning enough money that I didn’t really need to work. I just worked a little bit and you see that over the last couple of years, my video’s really tapered off.
I didn’t really do that many. Now I’m in a position where I need to work more in order to earn more money and grow my passive income again. So I had a couple of years where I didn’t need to work. Then expenses went up, business went back a little bit. So I’m now in the position where I’m working in getting. But last year had the unfortunate circumstance that me and my wife Kelly decided to separate. Now with that comes a lot of expenses that we weren’t really anticipating in our lives. I had also invested in cryptocurrency and lost thousands of dollars in that. So basically last year, financially was definitely not the best year for me and basically got into a position where I started acquiring debt in order to stay afloat. But also at the same time, passive income really came through for me. So my businesses, the way that I grow my online businesses is that I create businesses that spin off passive income.
So I do the work for these businesses, but then they generate income into the future. And so one of the things that’s been so good about these businesses over the last few months as as things squeeze as things got really tight, is that yes, I did get into a bit of debt, but also I could really cut back on my expenses and I still had the passive income coming in. So basically I was not in a dire financial straight, straight away. I was in a position where, okay, things are looking bad. It’s a short term squeeze here. I know I can work my way out of this position. I know that I can increase my income. I know that at any point if I need quick cash, I could go and get a job, but I have passive income coming in. So simply by reducing my expenses, I’m currently in the garage at my dad’s place.
I’m staying at my dad’s in order to save on rent until my income builds up again and I pay off some of that debt. But yeah, I can reduce expenses and the passive income can really carry me through. Now, let’s flip the script on this and imagine that I was going through the same circumstance, but I had invested in negatively geared properties, so properties that were costing me more money than they were making me and that I needed to pay in order to keep them afloat. So I was in that situation whether the properties were costing $100 per week or maybe $500 per week or whatever it may be, and I had the position where I’m going through this difficult time financially as well as business was going backwards to a imagine. If I had these properties that were demanding, then I need to pay extra money in order to keep the mortgage afloat.
Now this is a very different circumstance that I would find myself in where the assets in my life actually holding me back in times of trouble and actually causing me more stress, more anxiety, and causing me to likely be in a worse financial position long term. They’d be a lot of short term pressure there that I may need to sell these assets because of the, I can’t meet the financial commitment for them versus the position I was in where my assets are actually generating income, keeping me afloat week to week until I can earn extra income or cut my expenses back enough to get back on an even baseline and start moving forward again. Financially I was in that position, but if I had invested in properties that were negatively geared, then that will put way more stress on it. So life doesn’t always go to plan.
Often when it comes to investing, we look at what is going to logically be the best investment, but we don’t think about emotions. We don’t think about life, how things don’t always go up and up and up. That life goes in waves. Sometimes our income is higher than we might lose our jobs. Sometimes our relationships are great and then they’re not. Life has all of these twists and turns that it can take the same with your health or with the health or family members. You never know what’s going to happen. And so I do a lot of videos with Ben Everingham, the buyer’s agent from pumped on property, and we talk a lot about lowering your potential downside risks. But when we talk about that, we’re talking about the property markets, we talk about market cycles, we were talking about the mid cycle slowed down. We talk about not investing in the peak.
We talk about researching suburbs, all of these sorts of things to buy the right property that has less potential downside and more potential upside. But something that we don’t really want that we don’t really talk about that I do want to talk about in today’s video is that potential downside risk in your life. And so if you’re investing in something and it’s requiring you to pay money to keep that afloat, that can be a risk because there’s potential downside risks in your life where expenses may go up, you may lose your job, et cetera. You might not be able to afford those financial commitments anymore. And so investing in negatively geared property where you have to pay money every single week, every single month to keep that afloat is an extra risk that you’re taking because now you’re reliant on stability of income in your own life in order to keep that investment property and imaginative.
You invested negatively geared, as I’m sure some of you have, and sorry to hear it, but in Sydney or Melbourne, if you invested at the peak negatively geared, and now those properties have gone backwards. What happens if you’re in a negative equity situation where you can’t actually sell your property because you would lose money and have to actually pay the banks extra in order to close off your loan because of the property’s not worth as much as you paid for it. So if you’re in that situation, that’s a really bad situation to be in where you’ve got negative equity in negatively geared, so it’s costing you money. And then if something bad happens in your life where you can afford to pay that anymore, what do you do? So I don’t want you to get in that position. That’s why I want as you’re investing to think about your cashflow position, because if you’ve invested in a property and it’s positive cashflow or neutral cashflow in that it’s paying for itself and maybe even paying itself off, then if you lose your job, is that property asking you for money?
No, it’s not. Okay. If you lose that job and the property is spinning off extra cashflow or you’ve saved extra money into an offset account because it was positively geared because it was positive cashflow. Let’s say you’re in a dire situation, things have happened while you can actually then lien on that property and you can lean on that investment in that time of need in order to get some passive income that maybe you would have put extra onto the loan, but you can now put it into your own life, maybe reduce your expenses and that can help get you by or at least mean that you’re going to get in less debt until you find another job or until you grow your business. So for me, I got into some debt, but way less debt than I would have got into if I didn’t have the passive income.
And I also had enough passive income coming in that it gave me the time to work out a solution to my problem. So I probably gave me six to 12 months in terms of getting to a point where things would be really bad and I’d be forced to get a job and forced to take really drastic action. So actually had a six or 12 month period that I’m still in at the moment where I can actually work my way out of this and actually go ahead and solve the problem by reducing my expenses in my life. But also by working on the business and increasing my income as well. So the cashflow really gave me that time period that not many other people would have. So something that we don’t usually talk about. We talk about the fundamentals of investing in property. We talk about looking for growth, looking for cashflow, looking for manufacturer growth, but also this idea that there are risks, there are life risks that can happen that could affect your property investment portfolio portfolio.
And if you’re in a positive cashflow position, then that investment can be like it’s, it’s its own little island. It can be its own self contained entity that it will pay for itself, that it doesn’t need you to support it. I’ve got three children at the moment. They need me to support them. They named me to provide a roof for them. They need me to provide food for them. They named me to pay for their lifestyle and things like that. But if you have an asset that is like a child and paint that you need to pay for, that can be difficult. But if it’s its own self contained entity, if it is paying for itself, then you don’t have to worry about your life interfering with it. If you lose your job, it’s still going to pay for itself and it might even help you in those situations.
So I think cashflow is more valuable than we give it credit for Iran’s after the get rich quick in terms of equity, but they don’t take into account that you’re adding risk into your investment strategy because you have the risk of what’s going to happen if you lose your job, what’s going to happen if you have health issues? What’s going to happen? It’d be done. I had to become a carer for your parents. What’s going to happen if you have a separation? You’re not taking that personal and emotional risk into account. So just something to think about today of how valuable cashflow can be in lowering your risk and in actually giving you a better life. If I had invested in negatively geared, maybe I would have had to sell them or maybe I would have had to get a job that I wouldn’t enjoy in order to be able to service that, but because I have passive income coming into my life because I’ve got that buffer period, I can continue to work on things that I’m passionate about.
Yes, I have to work hard again, had a couple of years where I didn’t really have to work. Now I have to work hard again to grow that income, but I have that flexibility and I have the choice of what I want to work on and I want you to have that choice in your life as well. I want you to have that confidence and that security in your investments that no matter what happens personally, that your investments will take care of themselves and that your investments can take care of you as well. So yeah, I think cashflow is totally underrated. If you’re just investing logically, then you may not think about the risks of what might happen if something in your life changes. And so I want you to think about that today and think more about cashflow when it comes to your next investment, whether that be property, whether that’d be stocks, whether that be in investing into a business or whatever it may be. Thank you so much for tuning in to today’s episode. I hope this stimulates your brain and get you going. Why are you here? Go ahead and check out my quick money Monday episode on saving money versus growing your income and which should you focus on. I really liked that episode. I think that one’s really good. Also, link it up in the description down below. We should absolute best in your property journey and until next time, stay positive.