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How To Increase Cash Flow Personal Finance Guide

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This “How to increase cash flow personal finance guide” will walk you through practical steps to reduce liabilities and increase your assets.

Storytime: I graduated college right before the IT stock market crash and 9/11. I was working as a low-level help desk person – this is “in-person” technical customer service for businesses when all the jobs dried up.

I was working for a company for 4 days at a good opportunity when on the fifth day my head hunter (manager for the temp agency) came in all of a sudden and told me and the other guy that we were laid off. The merger for this company fell through last night and the people outside the doors didn’t know it, but probably 80% of them were going to get laid off as well that very day. The company may not survive. It didn’t last 4 months.

I never heard from that temp company again and I was in and out of temp jobs for 2 weeks to a month at a time for the next year of my life. This was very stressful with a wife and toddler to feed.

It was enough to live on, but not enough to enjoy life. We went into $6,000 in credit card bills and made $11,000 that year’s income with a family of three. Needless to say we were in bad shape.

The jobs had dried up and my skills weren’t high enough for anything other than entry-level and those jobs were being flooded by those with 5 years of experience.

It took me years to dig out of that hole and I vowed to never go back. I did go back into it until my mom suddenly died with no money and no life insurance. It was after that wake-up call that I figured out my cash flow was at best 0 and at worst hundreds of dollars a month in the hole.

Given that story, I imagine you are thinking, why should I listen to you? Well since 2013 I have paid off all of my debts except one of my homes and now sit on well over half a million dollars in net worth – that isn’t all wrapped up in my homes – we will cover why that is important below.

This post may contain affiliate links which means that I may receive compensation at no extra cost to you if you make a purchase from a link found on my site. Please review my privacy policy for further details.

These ideas are based on my personal experience and opinion and should not be considered professional financial investment advice. Furthermore, the ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Coins stacked up in columns that start out very small but grow exponentially showing how your money can grow - How To Increase Cash Flow Personal Finance text

What Is Cash Flow And Why Is It Important?

Cash flow is a business term used to determine how much money a company has come in and out of it.

In personal finance terms, cash flow is the amount of money you have from income (job and assets) minus the number of liabilities (debt) and expenses.

Pro Tip: You want this number to be as high as possible.

What Are Assets and Liabilities?

An asset per Robert Kiyosaki in his book Rich Dad Poor Dad is anything you own that pays you monthly (or quarterly / yearly) just for owning it. Examples are rental properties, dividend-paying stocks, interest from bonds, etc.

A liability then is anything you own that takes money out of your pocket on a monthly (or quarterly / yearly) basis. Your personal home mortgage, car loans, student loans, hospital bills, credit cards, etc. Reducing these to zero means that you will need fewer assets and income coming in to cover your bills.

Basic Cash Flow Strategy

The basic way to increase your cash flow is simple.

Spend less than you make.

Save money.

Pay off liabilities as fast as possible.

Buy assets as fast as possible.

We will cover each of these shortly.

Green board with the words tax, income, profit and cash flow written around a pie chart - Determine your cash flow

How To Determine Your Cash Flow

Learn exactly what things are Assets (puts money in your pocket) and what things are Liabilities (takes money).

Figure out what liabilities are adding to your monthly expenses to see the correlation between your debt and your expenses.

Also see the 7 types of income you could have coming in to reach financial freedom.

Click here to read my article on how to quickly and easily determine your cash flow.

Why Cash Flow Is Important

Cash flow is important because in order to escape the rat race of working for 45 – 50 years to be able to do what you want to do (maybe retirement) you need to build the money you have coming in from assets to outweigh the money you have going out in expenses and remove all liabilities that are hurting your bottom line.

That last statement may sound weird. What liability would you want to have? Why not pay off all your liabilities?

Well if you own a rental property. The mortgage from that property would go into your liability column, but if properly managed you could be making $200 a month after the renters pay all of the expenses for you.

And your money could better be invested elsewhere, especially if you refinanced in the glory days of the pandemic (like I did) to secure a home loan under 3% interest.

The above is the concept that Dave Ramsey won’t talk about: Good debt.

What Is Good Debt

Good debt is a liability that more than pays for itself. So if you could take out a loan and use that money to make more money than the loan that is good debt. That said, good debt is risky because what if you bought the wrong rental property for example? It could sit for six months vacant and cost you everything. So good debt isn’t for everyone and isn’t for anyone that has lots of liabilities already. Pay those down first before looking at massive good debt opportunities.

If you want to get into real estate, with a LOT less risk and a LOT less money then check out Fundrise. Fundrise is a real estate investment trust (REIT) that allows you to contribute money (start for $100 last I checked) to own a part of a huge portfolio of real estate that pays you money (dividends) quarterly. You don’t have to worry about renters, or fixing toilets, or coming up with 20% down or cracked foundations. So head over to Fundrise and see if it may be a match for an easy-to-fund asset.

How to achive financial freedom - a man is lying on the beach holding a laptop and looking very relaxed

How Can You Succeed Financially?

There is a clear path toward financial success and security.

It isn’t just being a worker for 45 years. Although for some it may involve that.

If you want to know what practical steps are needed to achieve financial freedom read my article on how to achieve financial freedom.

What Causes Negative Cash Flow?

Many people in the 1st world have a negative cash flow. They mistakenly put the value of their personal home in their asset column instead of in their liability column. I know you have heard “Your home is your greatest asset!” a thousand times on TV, but it just isn’t true.

I have a home that is 100% paid off and another home I live in. Even the home that is paid off has some liabilities attached to it. I just got a letter from the county stating that the new value of that home is now 25% more than it was last year and I will be taxed accordingly. If I don’t pay those taxes, eventually the county will take that home from me. So even paid-off homes aren’t cost-free.

What About The Home You Live In – Is This An Asset

Now let’s look at the home you live in. Do you pay a mortgage every month? If yes, it is a liability. If not, do you still pay insurance and taxes on it at least yearly? Yes, then it is a liability unless you are renting out a part of it to offset those costs.

Look I am not saying your house has no value. I am saying your home only has value when it is earning you money. So for a primary residence that is normally when you sell it unless you are renting out part of it or using it for a business to generate income.

What About Other Debts

Most Americans (and probably Westerners in general) have other loans and debts besides their primary home. Many have thousands if not tens of thousands of dollars in credit card debt with 20%+ a year interest, which is killing them financially. Then many in America have tens of thousands of dollars in student loan debt. Throw in an ER visit in America (the rest of the world has literally no idea how screwed up our healthcare system is) and you could easily have over $50,000 in hospital bills even with insurance.

A negative cash flow is when your liabilities’ monthly payments are so big that you need to get into more debt to pay the bills. So how do you get out of that or just improve your cash flow in general?

How To Improve Your Personal Cash Flow

The very first step to improving your personal cash flow is to get an accurate picture of where you are at. This doesn’t have to be to the penny or even to the dollar. It could be to the $100 a month and be just fine. Or if you are a 6 figure earner even within $1000 and be ok.

The point is to start somewhere. If you’d like to download PDFs and plot out 12 months’ worth of goals for your money with some fun saving and budget worksheets check out my budget bundle here and in the green box below.

Debt Payoff and Budget

If you are stuck in thousands of dollars of debt like I used to be (80k in student loans, more than 10k in credit cards and two car payments, etc.). This can help you.

Learn how to pay off debt – set your money goals and get a plan to get your net worth positive.

We track your income, debt, savings, and investments so that you can reduce debt and grow the other three.

Click here to purchase Your Debt Payoff & Budget Worksheets today.

Spend Less Than You Make

Once you have an idea of the gap you may be in it is time to look for ways to close it up.

Let’s say you find out that you are spending roughly $500 more than you make a month and as such are in $15k worth of credit cards. You have been opening new cards with 0% introductory interest rates to stop the bleeding. Always promising you will stop and get things in control. Yeah, I have been there and done that as well.

Now is the time to state why you really need to do this. What will happen in a year or 5 years if you keep this up? Really picture your life in 5 years going $6k plus interest further in the hole on a yearly basis. In 5 years you may now have $30,000 MORE in credit card debt and people are looking to collect. You could lose your home / car / family / etc. I wish I was joking. I have seen this ^^^^^ happen.

Or you could choose to be more disciplined. Learn to make meals at home or ahead of time to stop spending money out. Really ask yourself if you need new clothes / shoes / etc. Go to a discount (great clips or the like) haircut place.

If you want more ideas read my article on how to save $3000 in 3 months here.

Save Money

Change your direct deposit to put in at least $100 ( I would prefer you start with $500 – $1000 for my 6-figure IT workers) each paycheck into savings.

“But I can’t afford that” I can hear some of you saying right now. Well, it isn’t like you can’t transfer money from your savings account to your checking if you had to. But you know what never happens for 99% of people – transferring money from checking into savings…

Prince Harry saying "Boom" with a mic drop hand motion with the late Queen of England sitting next to him.
Man on computer with sticky notes on wall behind him. Text on background: How to Make More Money One Simple Strategy

Strapped For Cash?

There is one simple strategy that I have used for the last 20 years in my profession to make more money.

It has allowed me to 20x my pay in that time.

I used it to double my salary during the 2008 recession.

I have used it to double my salary in the last 5 years.

What is this simple strategy? Click here to read how to make more money: 1 simple strategy.

Pay Off Liabilities As Fast As Possible

Besides saving money this is key. You need to pay off liabilities as fast as possible. My budget worksheet will walk you through doing this. If you use the Code NEWCUSTOMER you can save some money on all orders over $5.

Basically, you will want to pay off your bills in either two ways.

1) Pay off the lowest amount first and then the next lowest until everything but your home is paid off. See my Budget for this method.

2) Pay off the highest interest amount first and then the next highest until everything is paid off except your home. Note: This saves you the most money but only if you do it and most won’t have the discipline to see method #1.

The reason why the first method works the best is that small wins trigger chemicals in your brain that make you feel good. Paying off a $300 credit card in full gives you a dopamine hit that makes you feel good. So then you pay off the $800 credit card bill and get another one.

Or your highest interest card happens to have an $18,000 balance on it and you will pay off most of your other cards before you finish paying off this (because you continue to pay the minimum balances on everything – no one likes late fees). And psychologically you will quit first.

There is another option and that is to find an 0% introductory offer – which you promised you wouldn’t do again (but it may be worth it) or look into a personal loan to consolidate everything and pay less interest overall. I recommend SoFI for this.

Buy Assets As Fast As Possible

Once you have knocked out a good amount of debt (no need to pay off your home just yet) you need to start building assets.

Most companies provide a 3 – 6% match in the 401k. Get this as soon as possible as it is 3 – 6% of your yearly annual salary in FREE MONEY.

Who likes free money?

Jim from the office asking "Who wants free money? This guy" as he points two thumbs back at himself.

Also, some companies will pay that matching if you contribute to your 401k on your bonus check as well, so don’t miss out on that FREE MONEY either.

Best Way To Start A Business: Don't Quit Your Day Job Text with an image of a baker rolling out flat dough in a restaurant kitchen

Should You Take The Leap?

A lot of gurus will advise you to get serious and go all in on your small business.

That is fine if you have several million dollars raised in venture capital, but what if you just want to start an online business that hopefully will one day replace your income?

In this article I cover why you should keep your day job and when to know the time to leave it.

Investing Or Start a Business

From there you have two choices.

1) Go all in on investing money in stocks / bonds and for an idea of how that works please see my article on how to invest your money on autopilot. You have a job so this is the easiest way to get the best returns, with little fees, and not have to spend hours a day (or even a year) working on it.

2) Start a business. This is way easier to say than to do. I have started several businesses and most have failed. The reason for this was I frankly didn’t know what I was doing and I listened to 12 different people telling me 12 different things. There are a lot of ways to make money online and so I want to give you a free video to help you understand probably the fastest way to make real money online and your options around that. If you want to see how to start an online business check out this video here from a friend of mine. You will be happy you did.

The Importance Of Emergency Savings

Before I go I would be remiss in not explaining that you need to keep at least $1,000 in emergency funds at all times. This will stop you from going further into debt and using that credit card.

If you dip into it for an emergency (my new tires were $800 because they were almost bald and winter was coming – Thanks Jon Snow) then use the automatic savings from your next paychecks to build it back up.

The key is to have cash on hand so you don’t need to borrow the bank’s money at 25% interest.

Text on a green cover "5 Things to do to live comfortably and stop living paycheck to paycheck" free PDF

Are you living your best life or are you stressed about paying the bills?

In this quick 2-page PDF, I cover 5 ways you can get your financial life back on track.

I used to live paycheck to paycheck and after years of paying off debt and maximizing my investments I am now able to save and invest more than 45% of my wife and I’s gross pay.

This allows me to live comfortably (not a crazy rich person) and sleep better at night. If you want this let me know where I can send it to you below.

How To Increase Cash Flow Personal Finance

We have covered that in order to increase your cash flow for personal finance you need to:

Spend less than you make

Start an emergency fund and automate your savings

Pay down your liabilities

Invest more money

Potentially start a business if you have the drive and want to separate out the hours you work from the money you make.

If you wish to track your cash flow monthly in a PDF I highly recommend this budget on Etsy.

Wow, you read a lot to get here. Can you do me a favor, please? Can you leave a comment if this was helpful to you or if I missed something? Alternatively, it would help me out a lot if you shared this content with those that might need to see it. Thanks, you are the best!

I believe that you can do this. If you don’t have the life you want right now then you must take action. Use small, consistent, daily steps to change the course of your future. It was how I started and moved from a negative net worth of $105k to over half a million in net worth in about 10 years (even through a pandemic and record-high inflation). It was also how I lost over 100 pounds in a little over a year and kept it off.

Do the Small Thing – Do it Consistently – Do it Over the Long Haul.

Picture of Dwight Scull sitting in his gaming chair in his office surrounded by board games and Role Playing Books.
“Marriage is hard. Divorce is hard.
Choose your hard.
Obesity is hard. Being fit is hard.
Choose your hard.
Being in debt is hard.
Being financially disciplined is hard.
Choose your hard.
Communication is hard. Not communicating is hard.
Choose your hard.
Life will never be easy. It will always be hard.
But we can choose our hard. Pick wisely.”

About Dwight Scull

I have been married to my wonderful wife, Rebecca, who puts up with me since 1999. I am a proud father to my Gen Z, son, and daughter-in-law. Grandfather to my favorite granddaughter who was born in 2021.

I lost my mom, father-in-law, and 12 others in 2013 and was DEEPLY in debt. I started reading and watching all the financial info I could find.

I chipped away at my debt and went from a negative $105k net worth having one home paid off, no credit card debt, and saving/investing 45%+ of my gross salary.

I used these daily habits to lose 100 pounds and keep it off.

I believe that you can overcome any challenge you face if you just take small daily actions and be consistent with them. It is how you will be financially successful.

Join my free Facebook group to get a ton of free resources to help you get out of debt, learn how to invest your money and work toward having the option of retiring early.

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