Cashflow 101

September 20, 2012 — 3 Comments

According to dictionary.com cashflow is defined as the sum of the after-tax profit of a business plus depreciation and other noncash charges: used as an indication of internal funds available for stock dividends, purchase of buildings and equipment, etc.

Put simply cashflow is literally the actual cash that flows to you.

Cashflow can come from a variety of sources and the categories of income we are going to look at are

Earned Income
Portfolio/Capital Gains Income
Passive Income

In particular our focus is cashflow derived from Passive Income.  Our focus is going to be on passive income because that is the least taxable income (meaning you get to keep more of the money you make) and we subscribe to Rich Dad’s definition of Financial Freedom…when your passive income is greater than your expenses.

dougfath

Posts

  • Steven Blasch

    Doug,

    Do you have any further information on how Passive Income is taxed? I’m sure there are different flavors, but is there a place to further read up on this?

    • dfath15

      Passive Income is taxed as ordinary income. The benefit of passive income is that you do not pay any self employment tax and with real estate you are able to deduct depreciation first, thus minimizing your taxable passive income.

  • Bruce

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