One of the biggest issues I find that people face is being able to generate cashflow. So many people are in jobs and not just spending up to their wage but beyond it as well in the form of credit debts. Credit cards, catalogue payments, loans, store cards, etc. If you want to have financial freedom then this has to stop!
If you really want to be financially free you have to decide which is more important to you. Trying to look good to people you don’t even know whilst at the same time being up to the hilt in payments for a life that you can’t afford or being truly free.
Will your life really go downhill if you don’t drink an expensive coffee from a store every morning? Will not going out clothes shopping every weekend really lead to you being rejected by your friends? Absolutely not. It’s time to get real about your life and get out of the rat race.
There are 3 simple steps to generating cashflow:
- Generate Cash
- Cut Costs
- Invest The Rest
All very straight forward right? So let’s look at these in turn.
How To Generate Cash
Most people have a way of generating cash in the form of a job. You tend to know from 1 month to the next how much cash that job is going to bring in and where a portion of that will be going. But what if you had 2 or 3 or even 10 jobs bringing cash in? How would that change things for you?
That is what got me into property. I was in a job and earning £15k a year and unhappy with my job. I wanted financial freedom but it was never going to happen on £15k a year.
So I started looking at property because then I could get paid on the 1st of the month from many different sources. If at the end of the month money was a little tight it didn’t matter because I always knew that on the 1st everything would reset again and I would have money in my bank again.
If the amount of money that you need to live on each month is £2k for example, you will be looking at getting around £200 a month from 1 property so you need to build up to having 10 properties and then you have everything that you need coming in each month. It’s simple maths really.
You can continue working in your job as you build up your properties one by one. There’s no need to rush into quitting your job because you’ve bought or leased your first property. You need to go through the journey of learning how to manage one, making mistakes then learning from those mistakes. After that you are ready to take on property number 2 and do the same again.
This is the part of generating cashflow that people want to do the least but it is just as important as generating extra cash.
So let’s use the £2k a month idea and say that you have a wage of £2k coming in. Each month you get your bills paid and you spend up to your wage on frothy coffee, nights out and retail therapy. If you could cut your expenses down to let’s say £1500 a month while still getting to do some of the things you enjoy at a lesser amount each month you are going to have £500 each and every month to invest. Within 6 months you are going to have £3000 in your bank that you can use to pay a property sourcer for a leasehold property bringing in £200 a month. What does that do to your available cashflow?
You now have £700 a month coming in which means that in 5 months you can take on another leasehold and have some cash left over. Then you have £900 a month coming in so in 3 months you can then pay a sourcer again (with the £500 left over from the last purchase) and have a bit left over again. Now you have £1100 coming in each month. Can you see how easily this all adds up?
You add a property on each time and before you know it you have replaced your wage. All of this started because you cut your costs.
How I Cut Costs
I use a spreadsheet and list all of my expenses. When I say all I mean all. Every time that you spend money it goes into the relevant section so you get a true picture of where your money is going compared to where you think it’s going. Doing this for the first time will surprise you.
Add on your income and take away your expenses from what you have going in. This will give you your disposable income.
Then you need to look at where your money is going and look at where you can make cuts. What is essential and what are you doing because you like giving yourself treats or looking good to others? The tougher you are on this the quicker you will increase your cashflow. If you buy frothy coffee 5 days week before work, you can step down by buying it 3 times a week and then down in stages to none.
I’m pretty ruthless with this which is why I enjoy a great amount of cashflow. If you want to do this too, you’ll have to become equally ruthless. Make your spreadsheet today and make yourself more aware of how you can increase your cashflow.
Invest The Rest
Now that you have extra cashflow available you can then start to invest that money in assets that pay you money. We’re not talking about higher interest bank accounts or savings plans. I’m talking about things that generate cash quickly. You should be getting cash back straight away. This is why I love property.
Property gives you quick returns that you can then re-invest and make even more money. This is why I believe that property is one of the best paths to financial freedom.
If you look at the section above in Cutting Costs, you’ll see how you can increase your cashflow and replace your wage. Once you’ve replaced your wage through assets you’ve achieved financial freedom.
You don’t need a lot of money to start investing in property. I remember reading an article in the Financial Times before I started out saying that you needed at least £100k in your bank account before you could start investing in property. I didn’t have £100k when I started out and that article pushed me back a bit. I then decided however that I would stop listening to these ‘so called experts’ and start listening to people who had actually done it successfully themselves. That’s how I became a property millionaire and you can do it too.
If you know someone who could find this useful, do me a favour and click on one of the share buttons so that they can see it. If you would like to start learning how to become financially free with someone who has done it themselves then click on the ‘Work With Me’ tab above.