Do you know what the single most important component to accruing wealth is? It’s not all about increasing your income, or about decreasing your expenses for that matter. It happens to be a little bit of both, and I refer to this phenomenon as increasing your cash flow. In other words, it’s about keeping as much money at the end of the month as you possibly can in order to invest it at a later date.
Cut Back on Your Assets
If you had to choose between an asset and a liability, many of you would choose the asset and feel as though you were wise in doing so. But, often times, that asset becomes it’s own liability. I know I know…I’m not making any sense. Let me try to explain.
I was speaking with my parents the other day and the statement was made, “The more things you have, it seems like the more expenses you create.” This quote came from my mother who is absolutely right. From the general accounting perspective, an asset is basically something that has value. This could be your house, your car, your clothing… pretty much anything that someone would pay for.
For those individuals that have acquired quite a number of assets, their expenses have most likely risen as well. Think about it. If Jimbob owns a house, a boat, and a car, and Marylou owns a car, but rents an apartment and has no boat, who will have fewer expenses? Marylou of course. She won’t have to store her boat or get it winterized each year, and since she doesn’t own a house, she won’t ever have to dish out the money for a new roof. Because she has fewer assets, she will ultimately have a greater cash flow. The fewer things you own, the fewer expenses you’ll have.
Increase Your Income
I have harped on this so often, I don’t really feel the need to repeat myself here. There are many ways to increase your income in this world today. Heck, I’m doing it right now with this website as I sit on my sunny porch on a Sunday morning. As long as you increase your awareness to the needs around you, you can certainly find a way to increase your income.
You Have Increased Your Cash Flow. Now What?
Some of you just aren’t used to having so much cash on hand and might not even know what to do with it. If you’re new to this whole “cash on hand” concept, just start out small. Invest your money into a CD or sign up for a brokerage account and purchase a few Index Funds. There’s absolutely no rush to this thing. As you grow more comfortable with your investments, expand your reach and diversify a bit. Take a look at some duplexes or quad-plexes in the area and read some books on real estate. There is plenty to learn, but there is a huge opportunity out there waiting for you.
With an increased cash flow comes a huge bank account, which can then be used for a multitude of investments. When your money makes money for you, that is when your bank account will truly grow!
There are plenty of other writers out there that have some fabulous points when it comes to your finances. Take a look at the reads that I found interesting this week!
How to Know When to Take Profits in Growth Stocks? – by Financial Samurai
5 Items to Buy Pre-Owned – by The Boss @ Like a Boss Blog
Let’s Make Money – Finding Jobs on Craigslist! – by Lauren @ L Bee and the Money Tree
Responsible Car Buying Tips – by Money Soldiers
How Much Savings is Enough? – by the Money Counselor
Buying My First Property, Was I Too Young? – by Canadian Budget Binder
Rent vs. Buy – by Suburban Finance
On the Road to Good Credit – by Money Smart Guides
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.