5 Ways To Increase Your Cash Flow

As my old accounting professor preached, Cash is King.

It’s true………….

Cash is the lifeblood of any business and of any personal finance plan. Having adequate cash on hand can weather any emergency or problem you can experience. Having a large cash cushion enables opportunities to be explored that otherwise would not be considered.

An unspoken part of having adequate cash on hand is also having adequate cashflow. Having enough cash coming in each month opens up a realm of possibilities. Once your basic living expenses are satisfied, the extra money can be used for a variety of uses. Treat yourself to a vacation. Invest it in your children’s future. Achieve financial independence. The possibilities are endless.

5 Ways To Increase Cashflow-2

Having the best plan and tightest budget does no good if adequate cash is not being brought into the household. Today, we’ll discuss 5 ways you can increase cashflow and diversify income streams so that your dreams can come true.

Excel In Your Career

One of the best ways to increase cashflow is to excel in your career. By kicking ass in your career, your future earnings can increase significantly even exponentially.

Whether you realize it or not, your career is your biggest financial asset and one you have a lot of control over. If you take the right steps along your career journey, you could potentially make millions more.

Don’t believe me? Let’s deep dive this.

If beginning your career today at $40,000 and average 2.5% pay increases over a 45-year career, you will make over $3.2 million in income during that time.

Now let’s say you rock in your career and average a 4% year-over-year pay increase during that same 45-year timespan; you’ll have earned over $4.8 million!

It’s proof that your career is your biggest financial asset. Don’t believe me? Then answer this question: What other asset do you have right now that is worth over $3 million? For many of us, our career is our biggest asset.

What would you do if you had $3.2 million right now? You’d probably spend a lot of time managing and growing it, right? Your career is the same way.

5 Ways To Increase Cashflow

If you can differentiate yourself and take the right steps along the way, the earnings growth is worth millions!

Even if you only earn 1% above average, it could be worth a million dollars or more!

To me, spending time and effort (maybe even a few bucks a year invested into training) developing your career sounds like a great financial investment to me.

The best way to grow your career is to find skill(s) that you can earn a lot of money at and that you are good at.

I know that the general opinion is that you should find something you are passionate about because that is the best way to grow your career and income. Hear me out. The reason I say to find something you are good at is because just because you are passionate about something does not mean you are good at it.

For example, I love baseball! Unfortunately, I was not blessed with the God-given talent to play professional sports. That’s ok, I still love playing baseball, I just cannot earn money at it.

Being good at something that people will pay money for, even if you do not like doing it, is the surest way to advance your career. You can always pivot later in life to something you enjoy more. If you work hard and kick ass at something that people find valuable, that is the surest way to grow your career.

You may not like it, but if you excel in your career, you’ll get paid handsomely for it! 😊

Both Spouses Work

Here is another way to increase cash flow quickly and easily: both spouses work.

I know the majority of the U.S. households already have dual incomes coming in, but the mistake being made is that they rely on both incomes to meet their daily expenses.

A great example of this is a friend at work. He and his wife both work and have good paying jobs (each earns $100K+ per year). We had a discussion a few weeks ago about his financial situation. It seems that he and his wife have racked up a ton of debt, wasn’t sure how to get out of the hole they dug, and wanted some advice.

As we explored his finances, it turns out they have a $500K mortgage on their house, they each drive brand-new luxury cars every year, and insist on their kids going to private school. It’s no wonder they are buried in debt because they are not living within their means.

What if you didn’t have to live off both incomes? What if you learned to live off 1 income and bank the other?

By living off 1 income and using the other income to invest, you’ll not only increase cashflow but also accelerate your journey to financial independence.

That’s our plan for achieving financial independence in the next 10 years. As I discussed here, my wife is re-joining the work force and living out her dreams by becoming a nurse.

5 Ways To Increase Cashflow

For years, we lived on my income only. With this new cash flow coming in, did we talk about buying a bigger house? A new car? An all-inclusive Caribbean vacation for the family? Nope.

Instead, we plan to use her income to payoff the debt we have remaining from our kids’ medical journey that we discussed here and to accelerate our journey to financial independence.

The trap most people fall into when both spouses work is that they set their entire budget using both incomes instead of just one.

What if one of them is laid off? Decides to be a stay-at-home parent? Or faces medical issues? What then? How will they recover?

By creating a budget using only one income makes life a lot easier and more flexible. Using that 2nd income to invest with and pay off debt faster can shave years maybe even a decade or more off the journey to financial independence.

Start A Side Hustle

If you want to increase cashflow faster and achieve financial independence more quickly, there are few better ways to go than a side hustle.

Having a side hustle will enable earning extra income that allows more saving to occur in a shorter period of time. Side hustles can go a long way toward paying off debt and increasing your nest egg.

A side hustle also means you’ll need to earn a lot less from your assets which speeds up your freedom date by several years.

5 Ways To Increase Cashflow

Don’t believe me? Here is an example.

Let’s assume you have no side hustle, and your financial independence (FI) goal is $50K in annual income to cover expenses. At a 4% withdrawal rate, you’ll need $1.25 million to reach FI. Your current annual income also happens to be $50K.

Let’s also assume that you are a good saver who puts away 30% of your gross salary. That’s about $15,000 per year.

If you save that $15K every year and invest it to earn 8% annually, you’d have $1.25 million in about 26 years.

This means if you start at 22, you’ll hit FI by age 48. Not bad. It’s way better than a lot of people.

Now let’s add a side hustle to the equation and see what happens.

You still earn $50K per year, need $50K per year to hit FI, and still save $15K annually for retirement.

Let’s say you pick up a side job at Panda Express (Starting pay right now is $15 per hour) and work an extra 10 hours per week. At the end of the 1st year, you’ll net about $5,000 in extra income for the year.

Add this extra income to your current retirement income being set aside and it goes up from $15,000 to $20,000 per year.

Now, it only takes about 23 years to achieve FI. If you start at 22, you’ll hit FI by 45. Pretty good for only working an extra 10 hours per week at a retail job.

But wait, it gets better. Let’s say in year 3 (age 25), you quit that job and start a consulting gig now that you have some career experience. It works out great in the 1st year and you earn an extra $20,000! Let’s assume you earn that same amount every year for the next 20 years and combine the 2 jobs together to now invest $35K annually.

Guess how long it now takes you to reach FI……..16 years! Start at age 22 and can reach FI by 38…. Gotta love it! 😊

This shows the power that a side hustle can unlock on your financial future. It not only speeds up getting to FI, but you can also use the side hustle to stretch your savings out farther.

Let’s assume you like the consulting gig and continue doing it past the age of 38. Assume you still earn $20,000 a year. This means that you only need to withdraw $30,000 from your retirement funds…. Sweet! 😊

On top of that, there are a plethora of ways to start a side hustle. You can:

  • Work a 2nd job
  • Freelance
  • Consulting
  • Start a business
  • And so much more!

The possibilities are endless and are only limited by your imagination.

Invest In Real Estate

I discussed in a previous article how real estate can provide a hedge against your stock market portfolio from crashing and protecting your hard-earned money. Did you also know real estate can provide extra cashflow too?

Depending on the type of real estate invested in, a consistent stream of income can be created.

For example, buying a rental property (or three! 😊) can generate monthly income to not only cover the mortgage and expenses, but also put a few bucks into your pocket each month.

Worried about the high amount of cash needed to put a down payment on a property? Don’t worry, online platforms like Fundrise and Arrived Homes may be just for you. These online platforms allow crowdfunding on actual real estate properties.

Some of these online platforms let you create your portfolio to generate income, grow your portfolio via appreciation, or a little of each. On top of that some of them let you get started for as little as $500! Worth checking out…..

Dividend Investing

Last but not least is dividend investing. Once setup correctly, dividend investing can provide consistent income stream to increase cashflow, pay down bills, and even speed up the journey to FI.

A dividend investing strategy involves buying shares of companies that pay continuous quality dividends. Then, own the stocks literally forever and using the dividend to create an income stream to live off or reinvest the dividend to buy more shares of great companies that offer quality dividends. Rinse and repeat until you have a large enough fund built up to meet your needs.

A dividend growth strategy works by finding companies that have year over year growth, are covering their expenses, and have increased cashflow year over year. If you find a company like this, you’ve just found a candidate for dividend investing. The reason you look for companies like this is that these types of companies usually slowly increase the dividends they pay to shareholders due to their continuous growth.

If you need a good example of what a good dividend growth company looks like, look no further than Coca – Cola, a personal favorite of Warren Buffet and a Dividend King. The definition of a Dividend King is a company that continuously and annually grow its dividend for at least 50 consecutive years.

Need help getting started? Check out this list of Dividend Kings for 2022.

What’s Next?

These 5 ways to increase your cashflow can help to pay off debt faster, improve your lifestyle, and even achieve financial independence.

5 Ways To Increase Cashflow

Improving your cashflow is not necessarily the pot of gold at the end of the rainbow, but it sure goes a long way towards achieving your future goals.

So, check them out, try them out, and leave me your comments here.

Until we talk again………….

Live The Life You Love, Want, and Deserve 😊