From Zero To One Million Dollars A Year In Sales

Let us continue on our journey of exploring the language that accredited investors use to build wealth quicker by using Fast Words. We are now on Fast Word number two.

Phantom Cash Flow

This is an interesting term, have you heard it before? Phantom Cash Flow is something you might overhear a sophisticated investor using. Phantom Cash Flow is basically referring to income or cash flow your making, but you won’t actually see the cash itself, because it is kind of Phantomish.   Let me explain using real estate as a teaching example.

If you own a piece of real estate as an investment, that real estate is like a mini-business, it has income and expenses.  And at the end of the year you have to file a profit/loss also called a ( P & L) at the end of the year.  You got to file taxes.

One of the great tax deductions that real estate offers is called Depreciation.  Depreciation allows you to write off a percentage of the value of your building each year over a certain amount of time.  Basically if you own a building Depreciation is a nice write-off that you can declare as an expense and reduce your net taxable income for a long time.  See the government made this tax rule that if you own a building, they recognize that your building is sorta falling apart over time and is depreciating in some what, so they let you incur this as an expense that you can write off, which will reduce your net taxable income.  If you reduce your net taxable income, you of course pay less in taxes. 

Let us say that an apartment building you own brought in $200,000 in revenue this year.  And that your building depreciated about $20,000.  So now on your taxes you can put an extra $20,000 of depreciation on your apartment expenses.  This is basically an expense that you can write off.  So what happens is your net taxable income was originally $200,000 is now $180,000 because you just wrote off $20,000 worth of depreciation expense.  See the deductions again; lower your net taxable income.  This in return will make you pay less tax at the end of the year. 

See, this is an example of Phantom Cash Flow.   You were able to decrease your net taxable income by $20,000 by using depreciation as an expense. This reduce in net taxable income means you essentially make more money at the end of the year because your paying less in taxes.  So this is extra money in your pocket that you are going to receive, more as a savings because you are paying less int axes.  But it is still money extra your earnings/saving, this is why its called Phantom Cash Flow. 

If we can reduce you from paying $50,000 in taxes to only having to pay $30,000 in taxes.  You basically just gained an extra $20,000 in cash flow because that was extra money you saved!   You kept an additional $20,000 in wealth, but you diddn’t really get the cold hard cash to say, but it is extra income because you just saved a bunch of money on taxes.  Money you earned but your not really seeing.  This is why it is called Phantom Cash Flow.  Cash Flow that is being earned, but you don’t see it, thats why it’s sorta Phantomish as I like to say.

Now you know what Phantom Cash Flow is.  If you were with us last time you learned what an accredited investor was.  Till next time, let us keep using fast words.  If you change the way you think and talk, you will change your life.   Is this the first time you’ve heard the term Phantom Cash Flow?

One way to dramatically increase your net worth over time is by changing the words you use. A long time a go I talked about fast words, how you could simply create more wealth faster by using a faster vocabulary of wealth build terms than slow terms.

You will often find accredited investors using faster words more often. What is an accredited investor, don’t worry, I’ll explain below. That’ll be a new fast word for you to begin. But let me give you a quick example of the old fast words post if you don’t have the time to read it now.

• a slow word is saving money, a fast word is raising Capital.
• a slow word is appreciation, a fast word is Depreciation or “Phantom Cash”
• a slow word is high paying job, a fast word is Cashflow

Do you see the difference in language, that rich people generally talk with stronger, more powerful faster action words than poorer people. The rich and poor don’t talk just differently, they talk the complete opposite. And you understand this. I’m sure you already talk much differently than your friends if your already more successful. And now of course realize, there are even more successful people talking even strong and faster words than we do that were not even aware of.

I once heard that your IQ increases as your vocabulary increases. So lets increase our vocabultarys sohall we? So I will start to post one for now, and in later posts, new fast words that you might not be aware of so together we can increase our vocabulary and our IQ. But of course I’m not just going to talk about any words, were going to explore fast words that by using them will increase our income making abilities by ten folds because we are using faster money making language whichw ill affect our actions and ultimately, our income.

The first fast word today, is about “accredited investors.” I mention it earlier in this post about how accredited investors more often say fast words than non-accredited investors. Let’s first explain what is an accredited investor.

An accredited investor is actually a term defined by the IRS to describe a high-net worth individual or couple. You are either an accredited investor or not in the eyes of the IRS. Here is what describes an accredited investor as an individual.

• A personal or couple, has a net worth exceeding $1 million dollars
• A single person who has earned over $200,000 in the last 2 years in a row, and is expected to do the same next year
• A couple who has earned over $300,000 in the last 2 years and is expected to do the same or more next year.

In essence, an accredited investor is someone defined by the IRS who makes money, or either has a lot of money. But the real question here is why does the IRS have a definition for accredited investors, they didn’t just decided to say people making money were accredited investors for no reason, there is a specific reason they have defined a person as accredited and I’ll share that with you.

It can really be summed up as this, the IRS believes someone who is accredited has enough financial intelligence to take part in risky investments. Because of this, they have made it illegal for some non-accredited investors to invest in certain things. You see a non accredited investor can only invest their money into a security managed by the SEC, while the accredited investor does not.

So for instance, if you wanted to invest other peoples money into stocks for example, if you were not registered for the Securities and Exchange Commissions, it is illegal to invest peoples money if they are non-accredited investors. The SEC regulates all securities, and the reason the do this is because they are trying to protect the non-accredited people from loosing their money in a risky investment. So they make it illegal if you aren’t accredited to invest into certain things that aren’t regulated, non-regulated SEC securities.

Basically the IRS doesn’t think that if you aren’t accredited you are more likely to be scammed by someone. And if you were an accredited investor they believe you are smart enough about money that you have enough intelligence to invest into something un-regulated.

Now if again lets say you wanted to invest other peoples money in stock, and you had your business your security registered with the SEC already, the SEC has already made sure that you are doing legitimate business and now anyone can invest into your security. The SEC regulates securities and makes it illegal for you to invest the money of poorer people so you can’t take advantage of people if you are selling an registered security. But you could invest the money of an accredited investor because the SEC manages they can handle their own money and make the investment.

So on the legal side of this all, the person who would get trouble is the deal maker, and if you put together stock deals or real estate deals for instance and you weren’t registered with the SEC, you could come under serious legal attention by the SEC if you were putting deals together for non-accredited investors.

So to sum this up, the importance of this post was to tell you what an accredited investor is, and that there are investments that not all people take can in part in. If it is not regulated by the SEC you have to be an accredited investor to take part in it. So you want to be an accredited investor.

Have any questions on what an accredited investor is?