1. When net income far exceeds free cash flow for long period of time

All the accounting red flags mentioned below ultimately leads to net income gradually exceeding free cash flow. As mentioned earlier, due to accrual accounting basis, revenue are reported as and when it occurs, while the cash for sale of products and services will received sometime earlier or later from the time when sales occur, this leads to discrepancy in net income and free cash flow, with potential for manipulation.

2. Great mismatch between rate of accounts receivables and revenue/sales growth

As a company is expanding its market and finding new growth areas, its revenue and sales will grow, this will normally accompany by growing accounts receivables. By right, theoretically speaking, if the sales increase at a certain rate, then the account receivables should also increase at around the same rate unless the sales are to customers with bad credit which will translate to bad debt down the road in future. Significantly higher account receivables growth rate than growth in revenue is a clear signal to fraud that warrants some investigations. Comparing and contrasting annual rate of growth in revenue and accounts receivables is a way to detect if the company is recognising revenue too early.

3. Imagine revenue from thin air

The legitimate revenue or sales from a retail shop selling bread is simply amount earned from sales of bread and similarly for other types of companies, there will be other proper things where the company core earnings is. However, there are a few ways where company revenue can be falsified. For instance, if the firm sells its property investments but report the proceeds gain from sale as current income, net income will increase substantially for that year but the earnings will be deceptive since it is not really its core earnings and is nonrecurring. Another way of imagine some revenue out of thin air is simply reporting cash proceeds from a loan as revenue instead of booking it under liability since the loan needs to repay one day and is not really income.

4. Using subsidiaries to generate fake income and store expenses and losses

A subsidiary of a parent company is another company with more than 50% shares owned by the parent company. This category of accounting manipulation is particularly hard to detect because the subsidiary may not be listed on the balance sheet, may be found somewhere in the footnotes or even not being disclosed in the first place. One way a parent company use subsidiary to generate fake income is by lending money to its subsidiaries but no cash actually changed hands while interest income from the subsidiaries are reported by the company. In a similar sense, by shifting expenses to subsidiaries, net income increases for the parent company.

5. Increasing the time period for depreciation and amortizations

Plant equipment being used for 10 years will have its value depreciated over 10 years with depreciation expense booked over the 10 years and capital asset decreases to zero at the end of the 10 years. The firm can decide the period of depreciation, with the longer the time period, like instead of 10 years, it is 15 years now, and there will be smaller depreciation expense for each year of the 15 years. This can also occurs for intangible asset with amortizations.

6. Capitalizing expenses for current year

When physical plant equipments are bought for current year, the expense for purchasing the plant equipment is capitalised as an asset and not reported as expenses based on accrual accounting basis. This is to properly recognise expenses by depreciation over the time period that the equipment is in use but when present year expenses is also capitalised, it will be sort of a fraud or manipulation because the company intend to write those current year expenses off over next few years herby reducing expenses for current year, boasting net income now. But this will get worse in coming years since if it booked most expenses as deferred assets, the amount will only get larger in future, leading to some reduced net income or even large losses in future.

7. Changes in accounting policies used my companies

One of the common ways companies boast net income is how it values its inventory. Take for example the type of inventory holds by business farming and selling pigs. How it defines the cost of goods sold is highly questionable. Red flag when there are changes in inventory valuation policies can be detected through sudden changes in cost of goods sold and gross profit which is profit before other expenses except cost of goods sold. In addition to this, firms can also utilises different ways to recognise revenue. Again, one can see this through abrupt changes in revenue from year to year and fine prints in notes accompany financial statements.

8. Declining revenues for several years in a row

There is only so much you can do in relentless cost cutting, like wasteful spending, unnecessary headcount and inventory management. Long term profitability is eventually still dependent on growth in sales. Like what happen when Steve Jobs is ousted from Apple last time, there is unrelentless cost cutting by the management board that the company may as well axe everyone so that the expenses is zero. There are no new innovative products and sales declined gradually, and then continue to axe and cut cost. What happens with Steve Jobs on board and increasing revenue from new innovative products like IMac, IPod, IPhone and IPad, is Apple surpassed Microsoft to become the world’s most valuable technology company even though Microsoft still owns more than 90% of the operating system market. In general, a company with more than 3 continuous years of declining revenue will not be wise to invest in since any cost cutting will have been realised over this time period already.

9. Current ratio less than 1

Current ratio is current assets over current liabilities and is a financial ratio to measure a company’s liquidity over a short term of one year or its ability to fulfil its debt obligations in one year time. Current ratio of less than 1 is a serious concern for companies in cyclical industries. Cyclical companies are those whose revenue decrease by more than 25% in bad times of economic downturn and contraction compared to good times of economic prosperity and expansion.

Current ratio of less than 1 is not really a cause for concern for non-cyclical stocks like utilities and even tobacco, as their revenue is relatively stable during both good times and bad like for example, smokers find it hard to smoke even during recession and people still need water, heat and electricity during downturn.

10. Ever increasing in outstanding shares

The not so good companies will see their outstanding shares increase over the years (not due to stock split). As this simply implies that the company is diluting current stock owner’s stake through both options and secondary stock offerings. This implies that they don’t generate much profit and don’t have much retained earnings to invest for growth, hence the need to use equity to finance growth.

11. Astronomically large “other” items under income statement and balance sheet

What items does the “other” contain, especially when the amount is in the billions as in a case of a sovereign wealth fund? This includes but not limited to “other expenses” on the income statement, and “other assets”/”other liabilities” on the balance sheet. While most companies have this, the question is when the amount booked under them is too large to be of a concern, i.e. a high percentage of the total net profits, such as fishy deals (related party deals) or non-business related items.

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An efficient market is a market for which time, effort and money expended to exploit pricing inefficiency are unlikely to produce the benefits of producing excess returns consistently.

The classic $20 bill story has been told in Economics 101 classes and there are altogether a total of four versions of the same story and each brings an important lesson.

Original $20 bill on the ground story, believing that the market is perfectly efficient – Version 1

An economist who is a staunch defender of efficient market hypothesis is walking along a park with another friend when both of them saw a $20 note on the ground. His friend alerted him to this finding but the economist says, it cannot be a $20 bill, if it was, somebody will have pick them out long ago. As a result, we should not waste our time and effort in bending our backs to pick it out.

As the first story shows, there are occasions and circumstances whereby there is $20 lying around on the streets and all one needs to do is to bend your back for a while and pick it up. In other words, you do not spend time and effort going around looking for $20 bill on the ground but they do surface.

Original $20 bill on the ground story, accept that the market is highly efficient most of the time but not every time – Version 2

An economist is walking along the park with the same friend again, when suddenly; his friend turns around and mentions to him a $20 bill on the ground. The economist said, “This is our lucky day! Need to faster pick it up because the reason why one usually doesn’t find a $20 bill lying around is due to efficient market hypothesis theory or no cash on the table principle. But no cash on the table does not mean totally no cash on the table but because people are quick to observe and pick up the cash such that one does not usually find $20 cash on the table.

I’d be a bum on the street with a tin cup if the markets were always efficient.

Sage of Omaha, Warren Buffett.

This is like the case for many financial markets, where highly efficient aspect of the market quickly eliminates any opportunities for obscene profits.

Believing that every market is not efficient story – Version 3

An economist is walking along the park with the same friend again, when suddenly; his friend turns around and mentions to him an antiquated and out of print postage stamp on the ground. The economist, and being an economist who only studies economic and nothing else throughout his whole life, sees the stamp as only a paper measuring 2cm X 2cm while his friend being a avid stamp collector and hobbyists sees the stamp as something that is worth $10 000 on the market for stamps. His friend alerted him to this finding but the economist says, cannot be, if it is really worth $10 000, if it was, somebody will have pick it up a long ago.

Just because it is unlikely to find a $20 bill in this area doesn’t mean that one cannot find some other things that are worth more than $20 since not everyone will know the true value of something while everyone will know the true value of a $20 bill. As a result, while it is unlikely that one can find a $20 bill on the ground, one is likely to find something else that is worth more than $20.

Believing that the market is inefficient most of the time after encountering once that the market is inefficient – Version 4

Once again, this is another economist and his friend walking down the park. Once again after detecting a $20 bill on the floor, the friend alerted to the economist, who says, Not possible, if there is $20 bill on the floor, someone would have pick it up a long time ago. Economist’s friend then decided to bend down and pick up the $20 note before going off. After the accidental discovery of the $20 bill, he decides that picking up $20 on the floor is a pretty easy way of earning money. After which, he quit his job and starts to start to search over the whole world for $20 notes to pick up. Barely one year later, the same economist is walking along the same park and saw his friend idling around but wearing worn and dirt clothing. Surprised at what he saw, he immediately enquires about what happened. His friend mentioned to him that so far has not discovered another $20 lying on the streets since last time.

Efficient market hypothesis is not true for every market and there are many different types and categories of markets in this world where the prices are far less efficient.

There are many markets in this world. Stock market, bond market, forex market, markets for various niche products, every niche products being bought and sold on ebay is a market, trading antiques is a market, buying and selling stamps is also a market, Facebook and mobile phone apps is also a market, every search terms with decent search volume is also a market and new markets are created every now and then, both online and offline.

As you can see, there are many markets in this world where the pricing is far less efficient than forex market that one is no more than a fool expending his time and energy studying and analysing strategies to consistently make money from the most efficient market in this world. In fact, a feller with less than average intelligence who discovered how to make money online from Google Adwords and Clickbank 7 years ago (but definitely not now) make more money, in a far less risky way, more consistently and more easily, than a person with a first class honour degree from a prestigious university spending his time and energy on trading forex simply by virtue than the first market is far less efficient in pricing than forex market at that point in time.

Google Adwords and Clickbank, the once successful money making/trading strategies self destruct by the very act of every Tom, Dick and Harry exploiting on the same strategies. Hence, it doesn’t make economical sense for the person to tell you for only a few thousand dollars. The only time that someone will sell a gold mine is when it is near empty.

There are many markets in this world and no doubt that they are much less efficient than the forex market. In fact, selling make money from trading forex seminars is also a market and that market is again no doubt less efficient than the forex market itself. Well, instead of subscribing to whatever is claim by the ads, learn the business of selling this type of seminars instead because you only need to spend three days to gross over one million dollars instead of spending your life watching the forex tickers to earn the same one million dollars.

So next time you see the same person kept advertising the same stock or options trading or forex seminar. Instead of concerning whether you can make that much as advertised on the newspaper, concerned about the words used in the ads, cost of the ads in newspaper, frequency of ads appearing in newspapers, the response rate by how many people suckered into signing up relative to how many people turned up, number of days of the course (usually only three days), the presentation and course content. If the ads kept appearing from time to time, it does not mean that the get rich quick course is legitimate or can really make you millions but the business of selling the course is so good as in its conversion rate that the person can kept advertising and conducting the course at 5 stars hotel to earn a decent profit. Because that is the real business you should be in if want to make some money and not looking at the forex screens.

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The make money online joke begin from this point,

Imagine waking up richer than Bill Gates!

If you’ve ever dreamed of making easy money, you’re going to love this… Making a fortune online is so easy a monkey could do it, if he wanted to. Few monkeys have the time to surf online though, they’re usually too busy swinging from trees and eating bananas.

Are you skeptical considering I said easy money and mentioned a monkey? Being skeptical tells me one thing, that you’re intelligent. And if you’re intelligent, you’ll appreciate this… You’re about to learn how to MASSIVELY CASH IN where every Webmaster, and so-called Expert, completely fail.

Here’s What You Should Know About Me

I hide behind a computer and tell it like it is. For the last 8 years I’ve been making a fortune online where everyone fails. Would you like to know how? Listen closely, what I’m about to offer you is different. Even if you’re not interested in my offer, you can benefit just by reading this page.

Let me ask you… Do you really believe that pictures of commission checks and bank statements prove anything? Some webmasters claim they make $50,000 per week. How much did they spend $20,000 or $70,000? Notice how they always leave this out?

Do you believe testimonials are real? Have you ever read any which look completely made up?

This is the type of testimonial which not only sounds fake, but is often written by one internet marketing “expert” for another. It’s not a secret that teachers of online marketing try to establish credibility by associating with other online marketing “gurus.”

Beware of the Following Gurus

Watch out for all the online “automatic money making systems.” These are typically sold by the “experts” who claim that anyone can make millions online while they sleep. Their claims and testimonials get more ridiculous everyday.

Some online marketing “gurus” will tell you to avoid using flashing objects on your Web site. They also say things, such as, content is king, and having two Web sites can create two sources of income. Their insights are absolutely ingenious.

The “experts” who really drive me bananas are those that think the only way to succeed online is to hold you back. Many of them offer high priced coaching, and push $1,500 seminars. Their entire existence revolves around taking advantage of inexperienced people.

Where most people claim to tell it how it is, I actually do tell it like it is. I make money in all niches online, even in niches outside of selling internet marketing materials. I have no respect for online marketing “gurus” with their endless string of misleading products and services.

So, with 8 years of experience what the heck do I know? Probably much more than I should. And I’m sharing every single thing I’ve ever learned that makes me a fortune online, so pay close attention.

I’ve perfected money-making strategies that are unique and unbeatable. To start out with, you won’t need ANY prior experience at all. Even if you’re just getting started online, I’ll bring you up to speed quickly. Everything I cover is presented in an easy to follow step-by-step format. As for the highly experienced marketer, I guarantee I can put you a lifetime ahead of some of the best of the best in the business.

Why Am I Sharing ALL My Secrets?

The fact of the matter is, too many “gurus” are popping up online every hour tricking people into thinking they can make $50,000 to $100,000 a month only working 15 minutes a day. In reality, running an online business is no different than any other business. You still need to have a business strategy and use your time wisely. Whatever money you can make online working 15 minutes a day probably won’t be as profitable as the person working 16 minutes a day. The point is, no matter what you are selling, to make a serious living online you need to outshine your competitors.

Here’s What Makes Me Different

Most online “gurus” don’t care if you learn anything. They want to sell you over hyped information designed to confuse you just so they can upsell you on more useless information. “Gurus” network with other online marketers to essentially share customers and profits (referred to as “joint ventures”). Rather than joint venture with any of these “gurus”, I feel it will be much more profitable in the long run to network with people I have personally inspired. This is why I decided to develop my own program for marketing anything online. You won’t find more practical, or truly profitable information on the Internet. Unlike anyone else, it’s to my advantage to not hold anything back.

Forget about all the Web sites with million dollar earning statements, exotic sports cars, and piles of money. It proves nothing. If you’re gullible enough to believe their claims, don’t even bother signing up for my free newsletter. However, if you are smarter than the average bear, or monkey, then take a closer look at this:

The Benefits Of My Program Include:

How to begin making money online with less than $20

How to build traffic to your web sites at a blinding pace

The most rewarding search engine optimization techniques

The most profitable Google Adsense strategies you’ll never discover researching online

How to generate easy income using free blogs

How to spot the hottest opportunities and immediately begin cashing in

How to get the maximum number of visitors to subscribe to your newsletters

How to create web sites with record breaking sales and conversion rates

How to develop, test, and successfully execute your own business concepts

Profitable web sites you can whip together in minutes

Proven techniques to get free traffic to your web sites

How to get amazing click through rates on all your PPC campaigns

The fastest ways to get high ranking inbound links to any web page

How to make a fortune by promoting only the right affiliate programs

Exact steps to designing a high profit ebook which sells itself

How to attract super-affiliates to drop everything and focus their waking hours on promoting your site

How to blow away every advertiser who’s competing on Google’s Adwords

The quickest way to get listed in Google

Advanced guerilla marketing techniques

All you’ll ever need to know about writing your own ad copy

Affiliate landing pages that herd customers toward clicking on your links

How to make an absolute killing using Google Adsense

And plenty of advanced techniques that will surprise you

You’ll never learn any of these techniques in a forum, chatroom, message board, e-zine, or anywhere else. This is not common knowledge.

All that’s required is that you’re smart and can follow directions. By smart, I mean possess some common sense. By follow directions, I mean read. That’s it. You don’t need a Master’s degree in business marketing. This is not taught at any university.

Creating highly profitable Web sites is a heck of a lot easier when you’re presented with clear, detailed directions. I can promise that after studying my program you’ll have hundreds of new ideas and the ability to execute each one flawlessly.

Just imagine having more time and more money to spend with your friends, your family, or finally being able to afford nice things. Haven’t you ever wanted to know what it feels like to not worry about money so much? You could have absolutely anything you want, anything! It all comes down to how bad you want it.

Can you picture traveling to exotic destinations? The sound of waves breaking along the shore, soft sand between your toes, a cool drink in your hand, and making money while only working on your tan? It’s time to think about living the lifestyle you’ve always dreamed of. You never know, it could be surprisingly easy and fun.

I may consider limiting this opportunity to only those who take immediate action. I’m not sure how many people I want to share all of my money-making secrets with. My program is specifically designed for those who are truly serious, and truly motivated. I may decide to discontinue it without notice. If you want real results without spending a fortune, order today.

Money-Back Guarantee: I offer a full 60 day money-back guarantee with my program. All I ask is that you show me how you applied just one of my techniques that doesn’t seriously make you money and I will be happy to refund your order. It’s important to me that you have nothing to risk, and everything to gain.

Bonus: Begin building a highly profitable Web business today. In 60 to 90 days, I’ll give you a bonus gift that will allow you to leverage your success. This bonus offer alone could make you a fortune, if you apply yourself.

The techniques you’ll learn are extremely clever. After you read this make money online ebook, you’ll be kicking yourself for thinking so mainstream

Disclaimer Liability: The above is a joke after looking at so many make money online ebooks sales letters.

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There is no doubt that every single one of them listed here still works by virtue of human greed. You may be surprised by the amount being scammed already.

1. Lottery scams

This is very common; I always receive it in my email account. I wondered how come I always win more than US$1 million lottery. There is always a catch in this type of scam, which is needed to pay an administrative fee to collect the winnings. For some reasons, the administrative fee can never be deducted from the lottery winnings.

Red flag need to be raised when the request is to send the administrative fee out of the country, usually to Nigeria.

2. Pump and dump penny stocks scams

According to Wikipedia, they account for 15% of spam e-mail messages. The spammers already hold the penny stocks (“pump” the stocks), then they mass spam through email to falsely recommend the relatively unknown penny stocks. You will always see the words “hot tips”, after there is a temporally increased demand from some suckers, the spammers then “dump” the stock.

The stocks will always be small cap and not blue chips, as so no need many buyers to increase their prices.

3. Work at home scams

There are many websites around advertising about make money at home by filling out surveys and get to try some products and services for free. But after paying for a not so small fee, you discover that what you get is around 200 hyperlinks to so called paid surveys websites that you need to sign up individually.

Always Google the website name with the word scam to see what other people that have already fall tricks to them say about them. In other words, see what other participants of the scheme have to say about it.

4. Investment scams

This is more subtle than the rest above. It comes from unsolicited phone call from a person, usually a female according to what my experiences. They usually claim to sell all sorts of investment products like stocks and insurance.

The problem with buying insurance over the phone no matter how good it sounds is – how to you claim the insurance policies when there is a need?

You will usually receive instructions on how to transfer the required payments to overseas banks and this is definitely a red flag.

5. Advance fees scam

This is similar to lottery scams, the difference being that the reason why there is a larger sum of money for you is due to a rich but dead person who has nobody to give his money to. In other words, by paying an “advance fee”, you become the beneficiary of the huge inheritance. The “advance fee” is used to speed up the transaction.

But I wonder if I did not pay the “advance fee”, how slow the transaction will be.

Moral of the story . . .

My advice is do not give your personal email address to any relatively unknown websites. If you want that free eBook about make money online, just remember to set aside a specially created “spam” email account for that.

In addition, there is no need for for you to surrender your real name unless you are applying for Google Adwords and Adsense. Apply common sense judgment on which websites is safe, and also for the offline correspondence case, whatever make money online seminars or invest in UK land seminars; surrender a “spam” email account with a fake name.

Image Credits: d70focus

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Recently still got a Rich Mum business school by a famous author.

Are those seminars really worth the buck?

Preview seminars are usually free but of course don’t expect the few days course to follow to be free also. Placing ads in newspapers cost money, renting places at 5 stars hotel also cost money.

Let me first say something, in my opinion, I feel that these sorts of “get rich quicker than a normal job” belong to some sort of semi-scams.

I defined semi-scams as not a total scam like Sunshine Empire but those that oversells and under delivered significantly.

A total scam is something that takes your money without giving you anything in returns.

A semi-scam is something that takes your money giving you something that really worth far less than the money.

Let us look at options trading, forex trading and stocks trading,

To make money from these 3 types of trading can be summed up in the following 4 sentences.

In any statistical game of chance,

1. Gain a deep intellectual understanding of the game involved.

2. Follow some strategies so that the odds are largely in your favour.

3. The odds must be large enough to be statistically meaningful.

4. Stay in the game long enough to reap its rewards.

I personally don’t play with options and forex, as a result, all I can say is that you don’t pay $4000 only to find out the following things,

1. More than half of the course and/or course materials teaches something for you to gain intellectual understanding of the basic concepts regarding the statistical game involved.

You can buy related textbooks and books on the subject matter concerned for under $100 and study on your own.

No matter got “an expensive teacher” or not, one has to gain “enlightenment” and insights on the subject on your own.

2. The strategies that they teach you only give you a 50% odds of winning in the long run. (or slightly more than 50%)

If the odds of winning is only 50% after putting in so much effort and time to learn what options are and how to trade.

I think one is better off guessing big or small for the dice game in casinos since you just bet either big or small consistently for each game and in the long run, you neither win nor loss. But it is better, one does not need to expend too much time and mental effort in thinking and learning about forex and options.

In conclusion, this is not to say that these 3 types of trading games cannot get rich quick, there are people who make millions from either of these 3 types of trading, it is just that when everyone follows the same strategies that result in high odds of winning in the long run, the same strategies no longer works.

For example, if particular technique is that shares of a company A will drop within 3 days after it announces earnings drop. Everyone follows this piece of knowledge when trading, then what do you think will happen?

Let us now look at make money online,

An example is a company call shops online that helps people set up e-commerce stores online.

But you have to determine and decide on what products to sell.

Be it business online or offline, you cannot do what every Tom, Dick and Harry is doing and expects to earn high economic profits.

If the make money online seminar at the end of the day only teaches you using some standard Internet Marketing techniques that one can find for free on Google, or even better, spend more than half of the time telling you how great make money online is when you are paying $3000 for a 3 days course. Then you know that you ended up as a jack ass being screwed already.

Or that you buy a make money online ebook claiming that can make $1000 per week online with very little work, only to find out that it rehashes some general stuffs on make money online where you can find free on blogs when you type “make money online” in Google.

Honestly speaking, the articles from the following websites sum up all,

http://www.badguruscams.com/articles.php

Let us now look at Rich Mum business school,

If one can spend less than $100 on 2 textbooks, one is on financial accounting, another is on finance to learn how to read financial statements and figure out how to calculate using financial calculators, interest rates, modern portfolio theory etc, what is teach in a 3 days $3000 course.

I think one will also be better off spending that thousands as initial capital for investments in stock market.

Let us now look at motivational seminars,

There is no doubt that your career progression, business results, academic achievements and subsequently financial freedom depended very much on your motivations.

As a result, motivating yourself in whatever you do is very important.

But if the motivational seminars are just repeating what are written in self help books and you indeed feel high and have the confidence to conquer the world after hearing the speakers who himself also feels high when giving the talks, only to find that the feeling is back to before a few days after, with the usual procrastinations or other problems, just like after reading a self help book.

Is it really worth to spend thousands on it?

The reason why self help often fail is because words only appeal to your verbal self and not behaviours.

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He does a very good job of introducing us to some important basic ideas in personal finance – 1. the idea that rich people don’t work for money, 2. the fact that having $5000 monthly income from assets is far better and stable than $5000 from a job as an employee. 3. Buy assets but not liabilities. Honestly speaking, without his bestseller book, most people will continue in working until they physically cannot work and not realize the need to invest for cashflow.

The following are some of the pitfalls that arises as a result of reading his book,

1. The idea that S and E quadrants are not good as B and I quadrants

His first book implied negativity towards professional and self-employed, and his later books specifically mentioned negativity towards these two quadrants of income generation.

Giving reasons ranging from a high risk due to income from specialty, that if something happens to you, high income will be gone. That it is better to have assets generating that income.

Well, I agree with his points, but in order to acquire assets generating $5000 per month as early as possible, it is more possible if you were a medical doctor making 5 figures per month. Good assets (stocks or physical properties) that provide substantial positive cashflow per month don’t drop from the sky.

Or that if you were a toilet cleaner, you most probably need to save and scrimp for 50 years before finally can buy enough assets to generate $5000 per month. Who knows? After saving and scrimping for 20 years, some freak car accidents means that your relatives will get to enjoy your little wealth or that a major disease like cancer wipe out all your entire savings.

No one says that you cannot be both E and I quadrants at the same time, you need high income in order to have substantial capital to invest without sacrificing current consumption.

If you owns a small business that creates $10 000 in profits per month, I believe that one has more money to invest at the end of the month. You don’t really need a B quadrant business if don’t have that opportunity and fortune.

2. Successful business founders like Bill Gates and Michael Dell are college dropouts, so if you want to be rich and happy, then don’t go to school.

I totally agree that if God were to appears and ask me whether I want a college degree or a US$10 millions fortune, I were definitely choose the latter and I believe that most people decisions are same as me.

The equation is not that Bill Gates is not degree holder, so you can be rich as him if you are not also.

While it is true that there are many wealthy people who never completes school or have high educational qualifications, there is also equally number of multi-millionaires to billionaires with college degree like Warren Buffet and Google founders.

Schools are where long lasting friendships are made, not in workplace or business environment; these are things far more valuable than any economic considerations.

You don’t need formal education to be a successful business owner but you do need good paper qualifications to earn higher income as an employee.

You don’t need formal education to be a successful business owner but you do need how to think creatively, critically and acquiring essential knowledge for your business on your own.

Don’t forget, whether you can business multi-millionaires is something that may or may not happen in future, a degree is a good backup just in case you didn’t make it in entrepreneurship.

3. Over-emphasing the benefits of network marketing

While I don’t dispute the fact that in business of network marketing may be good for some people, but I definitely choose to become a medical doctor rather than subscribing to some hyped up success stories common in network marketing.

Of course people at the top of a network marketing company make millions and want to hype up that it is possible if you believe in it. It is not hard to see from the picture of cashflows, money don’t drop from sky, network marketers need to sell something in order to make money. When success stories of people at top are told, coupled with standard motivational talks, all downlines will be motivated to sell products and/or recruit people to sell products, of course, the company can make millions.

But when everyone around you sells the same products, your chances of make some money will be reduced but no matter which person sells the products, the network company gains.

But does network marketing really suitable for everyone? What if the products is not really that good, overpriced, or simply don’t have such a need for it? Do you really want to force your friends and relatives to buy?

How to make a million dollars then?

There is no single answer to above golden question.

4. Your home is a liability, not an asset.

The answer is it depends.

Let us assume a hypoethical situation.

Mr Poor is an odd job laborer, working in a high risk environment but is fortunately adequately covered by life insurance which totally covers all mortgages for his primary residence should something happens to him tomorrow. Then some accidents really happen to him and he really die, leaving behind his wife and schooling kids. His life insurance paid off all mortgages and wife and kids can continue living in current house.

What is going to happen if he believes that his house is a liability and instead of owning a house, ends up renting instead. While it is true that he needs to pay for mortgages every month from his meager pay, he also needs to pay rent if did not own a house.

The fact is that a buy/rent decision on housing for primary residence depends on various factors and not simply asset and liability point of view.

Even from a cashflow point of view, a house is still constitute asset and liability components.

Related posts:

1. Why your house is an asset and not a liability
2. Why reading is the most crucial factor in getting rich?
3. Efficient Market Hypothesis and get rich quick seminars