There are 7 essential areas to provide you long term and rock solid wealth. I refer to these 7 essentials as The 7 Gears of Wealth and when they operate in conjunction with each other a powerful stable wealth plan is in place.
These 7 essential area’s are:
- Income – income stream from your job and/or business
- Investments – this is considered any place you put money where it can gain or lose value
- Cash – cash on hand for liquidity and for emergencies
- Guaranteed Income – passive income sources from investments, pensions, etc…
- Long Term Care – this needs to be structured to make sure your other gears are not worn down and broken
- Debt – to handle, reduce and eventually eliminate all personal debt
- Legacy – to provide resources and options to people and organizations after we are gone
Let’s begin by talking about the must of a positive cash flow in your life; also known as your Income gear. (I will cover the other gears individually in future articles.) A positive cash flow simply means that you have more income than expenses month after month and year after year. It is not about gross cash flow (although the more you bring in the better off you generally are) but more about “net” cash flow. For a quick example: you bring in $5,000 per month gross from your job and your spouse brings in $4,000 from their job or business. That gives you a gross household monthly income of $9,000. You both pay taxes, social security and the other mandates leaving your combined adjusted gross income at $6,000 per month.
From this adjusted gross comes out all your expenses needed to live such as housing, autos, utilities, saving for retirement, groceries, entertainment and any other expense you can think of to live your life and set up your future. After all those expenses let’s say you have $800.00 net positive cash flow. This net cash flow can have a huge effect on your eventual retirement.
The first thing that needs to be done is for you to take 45 minutes and add up all your income and all your constant expenses and see how positive or how negative you are every month. There are always unforeseen expenses but since we realize those expense occur then are they really unforeseen most of the time? Of course not, so in your cash flow you should put aside a category every month called unforeseen expenses and put money away for their eventuality. This will give you cash reserves for the hot water tank blowing up, the roof leak, the A/C unit breaks down in the middle of a hot summer, etc. Try taking our 5% of your income and setting it aside (out of your checking account) for these very issues. It has been said that life is just one darn thing after the other so plan for them accordingly.
If you determine your cash flow is negative then the first action you should take is any action that gets your cash flow positive. The best and fastest way to do that is to cut your expenses. Brian O’Connor was interviewed about his book, “The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese“. I recommend you read these and pick out a few gems you could use to without much effort save hundreds and maybe even thousands of dollars per month in expenses.
The next step is to try and make more money either in your current job and profession or making plans for a new job and maybe even a new profession. This could also be done by starting a small business along with your current job. Right now is the greatest time in history to start a simple small business right from your home that could easily generate hundreds and even thousands of dollars of extra cash flow into your life. Let’s assume you are a salaried or hourly employee. How could you make more money in your job? You could ask for a raise but before you do that, why not spend the next 90 days and make yourself more valuable to your boss and to your team? Your pay is very much associated with how much value you really bring to the table for the employer. Your goal is to make yourself indispensable to your boss and to your coworkers BEFORE you ask for that raise.
The fact is, your boss does not care if you need to make more money or that your cash flow in your life is not good. They only care about what you can do for them, so prove you can do more and should be paid accordingly. It has been said that most employees do just enough not to get fired and most employers pay just enough so you won’t quit. Sadly this proves to be true much of the time. Make a commitment to yourself starting today that you will go the extra mile at work. You might work a little overtime, help out on project, help the boss look good to their bosses, stay a little late, come in a little early etc. Start by checking your attitude and monitor self talk at all points during the day.
You manifest what you think about all day. If you focus on how much you can’t stand your boss then you will be correct. You hate your coworker? Find something you can like and focus on those points and build a bridge to your coworkers. If you will do this for the next 30 days you will find yourself starting to change for the better and your boss will start to notice. Now follow through hard for another 60 days and really change people’s perception of you to an integral part of their operation. Track all the little extras in your own journal.
NOW IS THE TIME TO ASK FOR YOUR RAISE
Set up a time to speak with your boss and come into the meeting and say how excited you are to be with the company and how much you like working on whatever you are currently doing. Now ask for your raise based on the last 90 days. Ask for more than you think you will get but only you can know how much that figure is at your company. I would ask for the bigger figure but be open minded to negotiate. Many times you will walk out with that raise and if you don’t you have choices to make.
Ask your boss if you could have another meeting in 60 days to review. During that 60 days become more valuable and keep asking until you get your raise. If it does not seem to be happening for you then now would be the time to start a job search for another position with the company. This would also be a good time to start working on your own small business that you can launch on a shoe string. I will have more on this in a future article.
A strong positive cash flow is the first must for creating wealth and crafting a fantastic future and retirement. So take a hard look at your expenses and your income and work at increasing your positive cash flow!