Contrary to the popular belief that living below you means is the best way to save and build wealth, living below your means can results to the opposite of this; this is because living below your means dampens your spirit. There is no actual guide book on how to increase your cash flow to build wealth because new ways are being reinvented each and every day on money making, money saving and money growing. However, there are strategies to keep up with the new trends and stay on top of your money game. Here are 5 strategies to help you increase your cash flow.
Always be Learning
One of the best wealth-building tips I have is to remember to ABL – Always Be Learning.
Without taking the time and initiative to learn about money, investing, and marketing for my career, I would not be on the wealth-building path I am today. I’m not a millionaire nor make an insane salary, but in the last five years, I have made huge strides that are leading me to where I want to be.
By reading books, especially with different viewpoints, listening to other successful people in personal finances or entrepreneurship, and reading financial websites, I was able to refocus my entire money mindset. Yet, even after I gained more knowledge, I still re-read books I have already finished and continue to learn from others. Knowledge is never-ending, regardless of your expertise, and can truly impact your path to future wealth.
And every time I re-read or listen to a new podcast (or old one) I discover something I missed that impacts my wealth-building process in a positive way. It’s amazing how often you can get more golden nuggets of information with a second or third read-through.
All this to saying, learning is never over and can be the game-changer you need to grow your net worth and wealth. So remember to ABL – Always Be Learning.
Build Multiple Streams of Income
Stop Trading Time for Money: Building out multiple passive income streams is, by far, the most realistic way to build wealth — but notice I said build and not find.
Passive income, despite what some may say, isn’t found. Most people will work towards creating a passive income stream during their spare time on top of their traditional 9 to 5. From aggressive (but risk-balanced) investing tactics, to slowly acquiring rental units, to creating a knowledge course and selling it online, those focused on building wealth outside of exchanging time for money generally find that it may even take several passive income streams to get them over the hump.
Start simple: if you’re responsible in spending, make sure you have liquid assets in a high-yield online savings account (or money market account) and grab a cashback credit card for purchases you already have cash on hand for; consider renting out an unused property or stationary vehicles; and then, look for ways scale yourself out of your skillset.
Spend Your Time Investing in Yourself, Not Investing in the Markets
My top wealth-building strategy might be slightly unpopular, but if you’re young – don’t focus on investing. Investing only really pays off when you have capital. Instead, invest in yourself before thinking about investments and retirement.
Having a focus on personal development during your younger years will help you significantly increase your earning potential. After that, once you have achieved a high earning potential, don’t scale up lifestyle expenses – this is how even extremely highly paid C level executives end up marrying their jobs.
Hopefully, by your late twenties, you can comfortably fund your lifestyle with just 20% of your income, consistently dollar average 50% of your income into growth-focused ETF that has a long term horizon – commit to NEVER drawing from this fund until the day you retire. Allocate 10% as an opportunity fund to start businesses or angel invest.
Lastly, save the other 20% for long term plans like getting married, getting a house and traveling.
Develop a Wealth-Oriented Mindset
My number one tip for building long-term wealth is changing your mindset. Everything starts there because you are the only one holding you back. Sure you need to pay off debt, manage your money better, and make saving automatic BUT you really have to believe you can do it and that it’s worth it.
You have to get out of your own way. The majority of North Americans are broke and living paycheck to paycheck even in the best economy and lowest unemployment rate we have ever had.
This is because of how they think about money and how to manage it. It is crucial for you to understand how you think about money and why and then test those thoughts against facts and reality.
This is especially true if you want to build wealth. You have to believe that you should build wealth, that wealth is a good thing, and that your future self will need income.
If you think money is evil, the wealthy are soul-sucking devils, or that you will never retire someday, why in the world would you try to build wealth.
Some things to think about in order to change your mindset include testing your views against reality. For example: do you think millionaires make a million dollars a year? The reality is that they don’t. Most millionaires make an average income. Being a millionaire means they have a net worth of a million dollars.
Another example: Do you think rich people are terrible people? Find someone in your life or community that you think is wealthy that doesn’t fit this mold. If you find one good wealthy person, that means that all wealthy people are not evil.
Then think about how you want to live when you get older. What kind of legacy do you want to leave for your children? Building wealth isn’t just about whether or not you need or want it. It’s about building the life you want for yourself, your children, and your grandchildren.
Once you start to examine your thoughts and feelings around building wealth, then you will be able to do the practical things you need to do to actually get there.
Track Your Net Worth
My best tip for building wealth is to track your net worth.
A recent study at the Dominican University of California found that those who wrote down their goals and met with an accountability partner each week to discuss their progress were 33% more likely to achieve their goals than those who did not write down their goals.
If you really care about achieving something, you should take intentional steps towards that goal — right? If you are a student, you want to make sure you are completing the required courses for your degree. If you want to be a professional athlete, you should manage your diet and exercise strategically daily. So why would you treat your wealth-building and financial independence progress differently?
Tracking your net worth with an intentional frequency forces you to recognize your progress (or lack of progress) over time and gives you an opportunity to change your strategy if you are not meeting your own expectations. Even if you only check your net worth quarterly or every 6 months, you’ll still be able to see its change over long periods.
This tracking habit can positively reinforce good money behavior, like investing and reducing debt. As you make progress, your brain will experience pleasant endorphin releases which will further motivate you to focus on your wealth goals.
Savanis