It is often said that cash is king. One of the major ways to build wealth is to increase your cash flow or create multiple streams of income.
Cash flow helps us to leverage certain investment and also to save money. Personal ability to generate cash is an important factor to consider when researching investment ideas.
This is a crucial topic when looking for ways to increase your personal income at large.
In this article, we will be considering ways to increase your personal cash flows.
What is cash flow?
Cash flow is simply the direction or movement of the most liquid form of payment which is cash. It can also be seen as the money left over after all of your expenses including discretionary and infrequent expenses. We can view cash flow in two different directions namely:
- Cash inflows: This represents cash that is being received or inflow of cash on daily basis.
- Cash outflows: This is the cash that is being spent on a daily basis. These can be personal expenses or business expenses.
We can also view our cash flow from both positive and negative aspect. Positive cash flow is the result of cash inflows being greater than out flows. Essentially, we are receiving more cash than we are spending.
Negative cash flow means cash inflows are lesser than outflows over a given period of time. We are spending more cash in this scenario than we are actually taken in.
Negative cash flow also results from outflows that exceed inflows. For example, monthly expenses, car loans, mortgages and others.
Sources of cash flow
- Actual job
- Dividend paying stocks
- Rental income
- Royalties from intellectual properties
Types of cash flow
- Single cash flow: A process where someone only has one single source of income. This deals with present and future worth taking one single cash flow and expanding it to the future.
- Equal series: These are series of cash flow that are equal and paid at each period. When you need to buy a phone or a car and you are to be paying a fixed amount every month or every year.
- Linear series: A system of cash flow that increases or decreases by a certain constant value.
- Geometric series: When income increases geometrically by a certain rate or percentage.
- Irregular payment series: Cash flow resembles no pattern, always having different types of cash flow every month or yearly.
Importance of personal cash flow
- Allows you to leverage opportunities: Managing your cash flow is important. Having positive cash flows for a period of time allows you to leverage opportunities. If an opportunity for investment arises, you will be in a good position to tap in because of your accumulated cash flows.
- It prevents you from accumulating debt: If you have a positive cash flow you are free from debt but if you have a negative cash flow over a period of time, you will need to borrow to fix certain fixed payment like groceries, car payment, utilities, mortgages or rent.
- It helps you shape your decisions about personal finance: As an individual we need to start making good decisions about our personal cash flows. An understanding of what cash flows looks like will help us save or invest more.
- Gives an indication of where you have a lot of money and what to spend it on.
- Helps monitor personal income and expenses: Cash flow helps to identify if you are making or losing money.
15 Ways to increase your personal cash flow
- Stick to a defined budget: Budget is a tool to stretch your paycheck as far as it can go. Familiarize yourself with the money going in and coming out. Get to know the income coming for you. Learn to master the type of budget you like and do your best to stay true to it. Having a budget helps you plan better and also prioritize your spending choices.
- Monitor the money you are spending on eating out: The significant reduction of these will give your cash flow a boost.
- Expand your earning potentials: Find ways to increase the amount of money coming in. Learn to expand your earnings. Be updated with what is most valuable about your current skillset and show people why they should pay you more. Earning potential is related to the value of what you can do.
- Maximize the money you are getting paid for the work you are already doing: Invest the money you earning right now into something lucrative. Get the most out of every dollar you are currently making to increase your cash flow.
- Reduce your expenses: Cut off monthly recurring charges that floods your account every month. Get disciplined about discretionary spending.
- Pay off your debt: Debt can be crippling especially when you have no money. Learn to give up buying some wants to pay off your debt. If you can’t pay cash for certain items while you are in debt don’t buy it. Also, document your debts and come up with a repayment plan.
- Increase your earnings: You can increase your earnings by getting involved in some side hustles that brings money. Start your own business and open doors to multiple tax benefits.
- Stop spending money on things you don’t need: Be disciplined and start buying things you need in order to see a significant increase in your personal cash flow.
- Sell things you do not use
- Focus on sales and marketing: When you focus on sales and marketing which is person to person activity like sending emails, persuading people to buy, communicating values to customers and calling clients. You are in turn expanding your reach and client base.
- Sell your knowledge and experience to earn more money: One of the most valuable things you can sell is your knowledge. A lot of people out there wants to learn quicker ways of doing things and they are willing to part with their money to save time and energy. Capitalize on this and turn it into money or profit.
- Build your go to expert positioning: Start creating value and communicate it with your clients. Build high level expertise by developing mastery in one thing and leverage your reputation for other things.
- Turn your capital to asset and get income from it: There some things you have that can be sold to buy an asset or start a business that can bring recurring income.
- Sell creative works online
- Learn new skills that brings value to your life: You should always strive to learn one new thing daily.
In conclusion, increasing your personal cash flow can be achieved easily if you are willing to expand your existing expertise or knowledge to acquire more money.
If you enjoy this article, share your thoughts on ways to generate more money at the comment section below.