Cash flow is the river of income that keeps a business afloat and running smoothly. Cash flow is the lifeblood of a household that allows everyone to flourish and succeed without daily financial stress.
What is Cash Flow? Simply, cash flow is the difference between your income and expenses. The more cash flow you generate, the wealthier you become. I wrote a series about cash flow roughly a year ago so I will reference it below.
- Cash Flow 101: How Much Money Do You Need for Your Dream Retirement?
- Cash Flow 102: Creating Passive Income for Retirement
- Cash Flow 103: Choose Your Wealth Generator
- Cash Flow 104: Create Your Long Term Strategy
- Cash Flow 105: Diversify Your Passive Income
- Cash Flow 106: Why You Need a Job
Today, I want to help you build a large amount of cash flow throughout your home. Creating streams of cash flow for your business will be similar. Let’s begin.
The Magic of Income Investing
Income and expenses. The easiest way to understand cash flow is by leveraging these two words each day. The best book explaining these terms is “Rich Dad Poor Dad” by Robert Kiyosaki.
In your household, you want to reduce expenses while also increasing income—this creates a wealth effect that allows you to reinvest cash flow into more income-generation assets. The magic of cash flow is that it will enable you to generate more cash flow.
Reducing expenses. Your first step is to reduce expenses by living below your means, reading books, paying off debt, and leveraging synergies. Synergies can be something like allowing adult children to live at home during college.
Instead of your child paying tons of money to live on campus, your family can use that cash flow to purchase income-producing assets.
Dividend Growth Investing vs Income Investing
Living below your means can reference living in an apartment when you can afford a house—or driving a paid-off car when you can afford a new car. You can use the money you save to purchase income-producing assets.
Paying off debt is vital to growing your cash flow. Debt is the opposite of cash flow because you pay towards someone else’s cash flow. You are their income-producing asset in the form of interest payments.
Pay your credit cards, car loans, personal loans, and student loans immediately. Seek help from books like “Baby-Step Millionaires” and “I Will Teach You to be Rich.”
Passive Income in DeFi 105: Crypto Rewards
My favorite debt reduction book is “All Your Worth” because of the simple 50/20/30 formula that Elizabeth Warren uses to explain expenses. This formula would have saved me a lot of headaches when I purchased my first home in 2008 (it was too expensive).
Cash flow example. For the article, I want to follow the Ramirez family through the process of creating significant cash flow. The family brings in $8,000/month in income.
Before they become serious about creating cash flow, they have $7,000/month expenses. They save the remaining $1,000/month into a standard savings account.
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After a year of focusing on paying debt and reducing expenses, they whittle their expenses down to $5,000/month. This allows them to save $3,000/month into a savings account.
Financial Security vs. Financial Freedom. Most people would stop right here because they save a significant amount of money each month. Most people are savers and seek financial security.
However, if you seek financial independence, you will need to become an investor.
Simply, financial freedom makes a crap ton of money compared to your expenses.
Most people do not understand why you need to make more than $8,000/month if you only spend $5,000/month. These people don’t plan for inflation, emergencies, helping their children, assisting their parents, traveling to exotic locations, or retiring early.
More Content, More Cash Flow
These people are “ham & eggers” or standard robots working on the hamster wheel. They are not bad, but they will work against you as your mindset progresses.
As you begin to see the value of creating massive amounts of cash flow, they know they should do the same. However, they do not want to put the work into the process. It’s easier to call you greedy or “money-hungry.”
As you create vast cash flow streams, your stress levels will reduce. Life will seem much more manageable and make better sense. The standard worker bee will attempt to project their stress and frustrations on you with politics, current news, ideologies, “you should have balance” comments, and other garbage.
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Income-producing assets. The Ramirez family needs to make much more than $8,000/month, but the goal is not to work more hours towards a job. They need to buy, build, or create income-producing assets.
Income-producing assets produce income (duh). They allow you to keep freedom of time while creating income for you. They allow you to make money while you sleep.
Buy assets. You can buy assets that produce income, such as dividends on the stock market or USDC on the crypto markets. You can also purchase real estate for rental income.
Build assets. You can build assets such as an automated business that creates income for you 24 hours. A good example would be an e*commerce website.
Create assets. If you don’t have much money to start a business or buy stocks, you can grind your creativity to produce royalties. You can write books, shoot videos, or take pictures to build stable assets that produce royalty income.
We Make $650/Month in Passive Income
Multiple streams of income. You can mix and match your income streams, synergizing even more cash flow. For example, instead of just investing for dividends, you can write a blog that tracks your progress.
The power of compounding will help grow your income streams to new heights you couldn’t envision. In my first month of dividends, I received $0.25, while last month, I received $950. That’s a huge difference in three years.
Cash Flow example (cont). The Ramirez family continues to create multiple income streams while keeping their expenses low.
Pumpkin Spice & Royalties
In their first year of building assets, they invest in dividends, USDC, rent a room, and start a blog. Their total household income increases to $10,000/month versus $5,000/month in expenses. They have a cash flow of $5,000/month.
By year five of building assets, their monthly income is $20,000/month versus $7,000/month in expenses (due to inflation). They have a cash flow of $13,000/month.
By year ten of building assets, their monthly income is $50,000/month versus $10,000/month in expenses. They have a cash flow of $40,000/month.
They are making too much money. The ham & eggers will tell you that you are making too much money. You don’t need that much money to survive.
My 60-Day Pre-Retirement
Here’s the real deal. The Ramirez family is actually working less, enjoying higher quality family time, and living stress-free lives. They are happier than the ham & eggers who will grind into oblivion.
In one of his books, Robert Kiyosaki says, “the less I work, the more money I make.” This quote doesn’t mean to be lazy; it means putting things in motion like management, delegation, and automation to free up your time.
This time allows you to invest into making more money. Robert Kiyosaki says, “I need to retire to focus on becoming rich.”
Conclusion. Life is costly, but you can learn to play the game better than others. The game of Monopoly taught us that owning the homes allows us to travel around the boards while collecting rent from others.
10,000 Hours to Build an Income Stream
The answers have always been there for us; we just need to decipher the context. We need to read to understand the game of life. Life is not a game.
Don’t buy big trucks, fancy computers, expensive vacations, huge mansions, etc. Those things will come later AFTER you build a massive stream of cash flow.
Life has always been about building cash flow. Once you have your systems in place, you can splurge on nice things. You can also synergize your fun by building a business around hobbies. Life is a fantastic gift, and learning to create money is one of the best aspects of the journey.
Don’t let people tell you that you are greedy. Keep making money because it buys you time with family. In the end, the person with cash flow will allow themself and their family to lead better lives.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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