Cash flow vs Net Worth

Recently I read the book “2nd Chance” by Robert Kiyosaki. It is always a joy reading his book, cause it is simply written (he is after all the author of the International Bestseller Rich Dad Poor Dad).


Especially, when you contrast that with “The Intelligent Investor” by Benjamin Graham.


Robert Kiyosaki on Second Chance: For Your Money and Your Life (click here)

The word “cash-flow” is repeated numerous time in his book. In fact, he made the distinction between:

  1. Being an employee, with a MBA climbing a corporate ladder, working for pay checks, bonuses, and a retirement portfolio filled with paper assets vs Being an entrepreneur, building a business and investing in the real estate, working to create assets that produce cash flow.
  2. “Net Worth Millionaire” / Millionaire next door- high paying job, money in the bank & stock market, nice homes vs “Cash flow Millionaire” – people who have assets that generate cash flow eg. businesses / investment properties / own resouces like oil, gold, silver, land etc.
  3. One type of rich is rich people with high paying jobs, such as corporate executives, professional people such as doctors and lawyers, athletes, and movie stars. High-Income rich. The other type of rich is the person who does not need a job to be rich. Most of these people are asset rich.
  4. Tertiary Wealth (paper wealth such as high paying job, money in the bank & stock market, nice homes) vs Secondary Wealth (Production wealth such as entrepreneurs who are farmers who produce food, fishermen who catch fish, oil drillers who produce oil, miners who produce gold, factory owners who produce products) vs Primary wealth (Land and oil).

‘Rich Dad’ author says the 2016 market collapse he foresaw in 2002 is coming (read here)

In any market crashes and in any possible Great Depression, Net Worth Millionaires and Paper investors who own ‘claims’ to wealth (tertiary wealth) but not wealth itself are most at risk. In fact cities such as New York will be hit the hardest. I reckon this is the same for Singapore as well (the city state doesn’t have much primary and secondary wealth).

As we know, Robert believes in property investments. In fact, in the book he mentioned that his Wife (Kim) and him play Monopoly in real life. They have thousands of little green houses, also known as apartments, two hotels, five golf courses, commercial buildings, several businesses and many oil wells.


In many ways, I do agree that cash flow is very important. The irony is that I did not set out to invest for cash flow.

In fact, I have very few high dividend yield stocks. When it comes to stocks, my primary focus for stocks is not on dividend yield nor capital gain. My focus is on potential capital loss. Eg. In the worse case what are the companies that can still survive and generate earnings and growth. (The Loser’s Game by Howard Marks)

Net Worth… what is it worth? (read here)

Focus less on Net Worth. Think more in terms of Cash Flow (read here)

I have been playing the Cash Flow game online recently (this was created by Robert Kiyosaki). And from the game I can sense the principles which Robert is trying to instill. In the games, you get deals along the way. For instance, you get to buy or sell stocks (at low to high prices), purchase preferred shares which give you rather low yield, buy properties that comes with cash flow (negative or positive), purchase of rare gold coins, chance to give to charity…

From the game, stocks typically do not offer you yield (you either buy or sell them – at different prices). So it is more for lump sum gains or losses. While properties tend to give you much better yield – but you typically need to get loans to purchase them first. Robert advocates getting into “good debt” to purchase assets like properties. Robert doesn’t believe in holding stocks for the long term (esp. when the major market crash will be happening soon in 2016).

The ultimate aim in the cash flow game is to achieve sufficient cash flow which is more than your expenses to get out of the ‘rat race’ and move to the ‘fast lane’ and live your dreams. Be with the “big boys” and have much higher cash flows.

You don’t win the game and get out of the ‘rat race’ by having large amount of cash. Even after getting huge capital gains from the sale of stocks, gold, land, properties, etc.. the objective is still to acquire assets that give you cash flow.


Coming back to Singapore, while I agree properties can generate cash flow, I am not sure if the yield is as attractive here (as compared to say America).

In fact, in this article, it mentioned:

Singapore’s house price-to-income ratio (Property Price / Annual Income) is 25.38. That means most of Singaporeans have to work more than 25 years to pay off their mortgage loans. In another word, if you “invest” in a property and stay in it. It is an “expense” for the rest of your life.

It is probably hard to grasp this concept because such phenomenon is a norm in Singapore. But if you have a chance to compare this globally, it may surprise you:

  • U.S.’ average house price-to-income ratio is 2.16
  • Germany’s ratio is 4.78
  • U.K.’s ratio is 6.73
  • Japan’s ratio is 6.99

And that you shouldn’t own a Singapore condominium for rental yields. According to Global Property Guide, despite the recent drop in property price, the rental yield remains poor at 2.35% to 3.00%. The central area Condo rental yield is as pathetic as 1 to 2 percent.


So the other option is invest in overseas properties. But well, you need know the place, regulations, tax laws etc well…. to invest in properties overseas.

And I have heard and read about ‘horror’ stories from colleagues or locals who have invested in overseas properties. Eg. Cases of people breaking in, tenants who just stay there without paying rent (squatters) -even after you chase them away and lock the gate, they can still break the chains and locks and continue to stay there for free… without you being there physically it is hard to take care of your property and manage the tenants. Of course one option is to ask or pay the security guard or neighbours for help..but it is still a secondary measure.

Or you can invest in REITS.

However, to Robert, he views REITS similarly to shares (paper assets). For him, properties near places where there is always work / schools (hence there will always be ready tenants) at good prices and steady cash flows are good assets. He is not worried when market crashes etc, cause the cash flow from these properties will likely be there. Actual properties allow him to use leverage (good debt) and do alterations to the property.


I wonder if anyone would write a best seller like Robert’s book, in the Singapore context. A book that focus on being a “Cash Flow” Millionaire.

What would be in the asset column? High dividend yield stocks / REITS / Business Trust, Singapore / Retail Bonds, CPF, P2P loans…. (5 properties….hmm…)

Well, after all, we have quite a few Singapore bloggers with high dividend income.

Five Bloggers Collecting > S$10,000 Of Dividends Yearly (read here)


I don’t consider myself as rich, but if I am, I reckon I will fall straight into the high-income rich (with paper assets). If you see the image below, my assets probably belong to what is shown on the right page.

20160414_224722 (2).jpg

In fact reading most of the financial blogs in Singapore, I feel that most bloggers are paper assets rich (they invest in stocks, bonds, savings) – “Net Worth Millionaire”? Then again, there will always be property asset rich people in Singapore (who don’t blog).

At one period last year, there were some articles written by some of our local financial bloggers here about their individual net worth.

“My Net Worth Is Only 5-Figure And I’m OK With It” by Turtle Investor (read here)

“I’ve Zero networth!” by BULLy the BEAR (read here)


Perhaps if I live in Australia or America, I might have been a different kind of investor. I reckon in these countries where the yield is much better for properties, where the overall price for properties is generally lower (in relation to income level there) and where there are no such things as Total Debt Servicing Ratio (TDSR) and Additional Buyer’s Stamp Duty (ABSD)… things would be different.

Well, nothing is impossible. As difficult as it might be – it is still possible to invest in overseas properties. I can be an entrepreneur, or start a business on the side while having a full time job.

And yes invest in ‘primary wealth’ such as silver or gold.

Financial freedom out of reach? Shall leave you with this song.


About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page:
This entry was posted in Dividend & Yield, Portfolio, Uncategorized. Bookmark the permalink.

11 Responses to Cash flow vs Net Worth

  1. great post. i think the context is different but he would likely considered sg properties as a bubble.i listened to him on a podcast recently and he is a doom minger who is saying 7 years ago he forsee 2016 to be the year the stock market crash hard. so lets stay tuned.

    you are not a high div investor but cash flow is important. perhaps that is another post


    • apenquotes says:

      Yup. My primary focus is not dividend yield or capital gain. I tend to focus more on possible capital loss — The Loser’s Game by Howard Marks.
      But dividend is somewhere up there… and cash flow is not just from stocks but also P2P loans.


  2. Henry says:

    The price vs income ratio is a killer. Was it due to the asset enhancement policy advocated some years ago? I have heard ppl saying its just a way to trap me here and slog until you die just to pay f9r that hole . Home ownership for a 99 years leasehold pigeon hole? I am not sure.
    When i was in California, I was shocked that my colleagues home were just US $100K+. Most were big beautiful 2 stories landed ppty (like our semi-D) and 5 to 10 mins drive from the beautiful beaches facing Pacific Ocean. Typical family model: 1 wife, 2 dogs and 3 kids. Work and life stress level, not even half of what I experienced here. I felt happier when I was there, honest feeling. All of them paid off their loans within 5 years. They could not understand how we can pay a whole life time of mortgage just to live in a small pigeon hole. Their sharings prompted my thoughts about the meaning of quality of life and life itself. Evetually I told my kids, I am fine if they want to live or work overseas in places like that. It makes no sense to slog our whole life just to pay for a 99 years “pigeon hole” in a cramped and high stress place. Its a life time liability for most ppl, and definitely not an asset to me. As long as they are happy, they may go.


    • apenquotes says:

      All I can say is – we can’t choose which country we are born in. Either we make the best of what we have here, or choose to go elsewhere.
      It maybe much harder for us have assets to generate cash flow here, and pace of life is faster here… but that doesn’t stop a lot of people from trying (to be financially free).


      • Henry says:

        Cant choose where we are born but can choose where we want to live or work because the world is so connected now. There are more than 100K living overseas. Some have no intentation or date of return. See why MIW always organize and meet us when they are here. Scare the talent core will erode when more take up citizenship or PR elsewhere. Everyone wants to live a better life, just like the FT on our shore although some are using it as a stepping stone.


  3. mysweetretirement says:

    Unbelievable about the 10K rental income you show above. In Singapore, unlikely you are able to rent a whole flat for 10K.

    However, I am a believer of passive income and still working hard on it.


    • apenquotes says:

      Oh, you mean the page from the book “2nd Chance”…

      The rental yield in Singapore is probably lower.
      Well, if Robert was to create a Singapore Edition Cashflow game (well – they have Singapore Edition Monopoly), it would be very different.
      Maybe we need to play longer to get out of the rat race (instead of 1 hr, you need to play 5 hrs), and the high yield cash flow assets may not be properties, etc.
      Assets are after all invented by people, and they come in different forms: intellectual properties (you write and publish books), patents, businesses….

      The tax and regulatory system in Singapore (pertaining to properties) is also different. Instead of fighting the system, go with the system. For instance, the Singapore government has been pushing very hard on start-ups, entrepreneurship etc…


  4. PIT says:

    I think at the end of the day acquiring assets (paper or not) that produces certain income (rental or dividends) is important. It gives you the cash flow to sustain your lifestyle.


  5. Rolf says:

    Hi Apq,

    I watched the RK Kioyasaki 2nd Chance video last year.

    RK is not my favourite but many things he said certainly do makes sense.

    Eventually stocks or properties? It is up to individual which one you feel more comfortable or more passionate with.

    Cashflow is important for those that their job or business is not so stable with higher fixed expenses such as family to feed or wife not working.

    Therefore I reckon eventually we need to be Crystal clear what our situation is, to choose the right strategy in stocks or properties!


    • apenquotes says:

      I reckon you don’t become a best seller author by saying the norm. Actually I feel Peter Lynch is a better writer – he dare to say, has a quirky sense of humor, and very relatable.
      My personal view is that no matter what is the nature of our job or situations, our human capital depreciates over time – and very little beats passive cash-flow system that requires min. effort (a system which is best suited for your own personality). In a way, it is journey to self discovery.

      Robert’s books aren’t those ‘how to do it’ kind of books, but rather about our beliefs and system (and more towards Property investing). The kind that prompt one to take the first step and don’t give up.

      However, I can sense the common principle between how I search for stocks and how he search for properties. In a way both us like to search for ‘stable assets’ – we like to be ‘lazy’ investors. He find properties near work places or schools – where there will always be ready tenants, while I find for companies in boring sectors providing products and services that will always be in need (in good or bad economy) – like refuse collections, death care, estate maintenance, repetitive low cost disposable products etc.


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