Investing - Chapter 3

We read the story of Ram and Ashwin. Ram had professional education, great career and a loving family. But was in a financial hole. Ashwin had a mediocre beginning and went to do really well in his late 30's. They both meet at a restaurant and discuss their situations after initial pleasantries.

Ram - "Am in deep financial problem. My wife has lost a job, I have lost my home. I think I am losing it in life."
Ashwin - "Ohh, what happened? I thought you were doing just great."
Ram - "Well I made some wrong choices. Should not have gotten into huge debt"
Ashwin - "Ram, debt is game. Its played on everyone. Most get suckered into it not knowing the full impact of it."
Ram - "I dont get you. What do you mean by game? Its looks much bigger than that."
Ashwin - "The consequences of getting into huge debt are high. But it still is a game. Let me explain this in a different way."
Ram - "Interesting. Please proceed"
Ashwin - "Let me ask you this question. Where do you get your money from?"
Ram - "From my monthly salary. My company pays it"
Ashwin - "Yes, most of us get it that way. Your company is in-debt to you every month for the services you provide"
Ram - "Thats correct"
Ashwin - "Whom are you in-debt'd to every month?"
Ram - "My bank, I guess"
Ashwin - "Well.. you are also in-debt'd for telephone, electricity, internet, cable, child school, grocery shop...etc. Most of us will have to pay atleast 20-30 different folks every month"
Ram - "But those are small and most are necessities."
Ashwin - "Exactly, the point here is that we get money from one and pay many!"
Ram -"Hmmm.. true"
Ashwin - "In my case, I have about 300 students. Their parents pay me a monthly fee. And in turn I have to pay to 40 folks. I get from many and pay it to less number of people"
Ram - "You are a business man, so more people will pay you."
Ashwin - "Agreed, if you get money from one source and let it go to many. Most often than not you will run out of money. If you loose the job then it becomes real bad. On the other hand, if you get money from multiple source and have lesser number of outlet then you will have a positive cash flow with less risk."
Ram - "Wow, never thought about that. Oops.. sorry am getting a call from my office! Let me pick it"

Its late in the evening and Ram gets a call from his employer. He has to report to office for an emergency. Ashwin feels pity that his friend has to work at night to fix someone's problem. Ashwin tells Ram to come to home on next weekend and talk more about this. We will see what happens further in a weeks time.