How to Channel the Velocity of Money and Take Control of Your Financial Outlook

How do rich people get rich and stay rich? They always keep their money moving in new and unique directions. 

When we lack financial education, we think that saving money (even in a high-yield savings account) is the terminal location of our monetary needs.

However, we need to use our money to create money continually. Instead, we exchange our time for money, which is a long-term losing proposition.

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The velocity of money. The velocity of money is how fast you can get your money back from one investment to fund another. However, you keep the original investment, which continues to pay you.

I learned about the velocity of money by reading Robert Kiyosaki’s books. To me, he is not even an author but an institution. 

The concept is simple on the surface but deep and satisfying in execution. Very few people can process the inner workings of creating infinite returns and leveraging the velocity of money.

Let’s go through three examples of the velocity of money: small, medium, and large. You can use leverage to maximize your speeds, but it’s unnecessary. Life is about making the right choices for your risk tolerance.

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A small example of the velocity of money. I discussed starting a garden to fund your income-investing portfolio in my Dirt to Dividends series.

Let’s say you make $25 weekly selling tomatoes at your local farmer’s market. With this $25, you purchase a closed-end fund that yields 10% and pays monthly.

After ten years of reinvesting into your closed-end fund, you create a $300 monthly income stream. Now, you have two income streams: your tomatoes and closed-end funds (CEFs).

You decide to purchase a vending machine for $3,000. You pay $300 per month for a year to pay off the vending machine using your CEF income.

Your vending machine nets you $500 per month. Now you have three income streams: tomatoes ($100), CEFs ($300), and a vending machine ($500).

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Finally, you choose to buy a barn house for $8,000. You use your three income streams to pay off the barn house in one year—creating $300 per month in storage rental income. 

You have four income streams: tomatoes ($100), CEFs ($300), a vending machine ($500), and the barn house ($300).

You created a $1,200 nearly passive income using your garden to fund your investments. Keep in mind that you could have used leverage in the first year to buy all four investments.

A medium example of the velocity of money. If you have assets, you can create even more cash flow quickly.

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Let’s say you own a home in California with $500,000 of home equity you can safely leverage. You first decide to buy a home in a small city in Mississippi.

You buy a $150,000 house in Mississippi for cash, bringing in $1,200/month in passive income. 

You use $300,000 of your home equity to build an income-investing portfolio that nets you $2,500/month.

Finally, you use the remaining $50,000 of home equity to purchase ten arcade machines to put in mom & pop restaurants across your city. These net you $500 per month in passive income.

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From this home equity pull, you created $4,200/month in passive income, but more importantly, you diversified into different asset classes. 

Your mortgage payment increased by $2,000 per month from the cash-out refinance, but you decided to get a roommate for $1,500 to offset those costs.

A large example of the velocity of money. You own four properties with a combined home equity available of $1 million. 

You leverage the home equity on all these properties to invest in a 20-door apartment building in a small city.

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In total, you increase your monthly passive income by $3,000 per month. You use this new $3,000 to fund an income investing portfolio.

Within a few years, your income investing portfolio pays you $3,000 per month as well, alongside the apartment and homes.

You decide to purchase three Teslas at a cost of $1,000 each per month. However, you can earn $2,000 per month each by renting them on Turo. Once you pay them off, they are in an infinite return.

You are now making too much money to count. You can rinse and repeat by buying more apartment buildings, Teslas, or dividend-paying stocks. You are rich.

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Always keep moving. What happens when water stays still for too long, like in a pond? It grows algae, bacteria, and mosquitoes.

How about the water on those raging rapids and fast-moving rivers? It attracts wildlife and human activity. It is a constant source of energy and refreshment for mother nature.

Your money (and mindset) should always be moving in different directions. The minute we get comfortable, we fall behind.

We should always strive to learn something new. Then, we can experiment and test with a small amount of money.

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If the income stream bears fruit, we can invest more time or energy into the project. It’s all about moving forward and conquering our fears.

Why do the poor stay poor? If you have a fixed mindset, the world will leave you behind. You simply cannot keep up with inflation, and the cost of living increases. 

Rich people own assets but continually use them to create more assets. They don’t just purchase two houses and sit on them for 50 years.

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They can leverage those two houses to buy three more homes, a car wash, and a clothing store.

Conclusion. You can create money out of thin air. If you don’t have money, you must make content—pure money.

If you have some money, you can leverage it to create more money. Right now, I have $40,000 in my M1 Finance portfolio.

Build a Dividend Growth Nest Egg

I can create a loan against 40% in less than 10 minutes. I can use that $16,000 to purchase a car to rent on Turo.

I can use the proceeds from Turo to pay back the loan in 16 months. Now, my car is in an infinite return. But guess what?

I can go back to M1 Finance and leverage another $16,000. Now, I have two cars and two income streams. 

This is the power of the velocity of money. Once you understand its power, you can control your financial outlook—reducing your dependency on your employer. Good Luck!

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