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Creating Cashflow

Creating Cashflow

A lot of people dream about quitting their day job, but aren’t able to do it because of their financial situation. We’ve all got bills to pay! But what if you could create enough cash flow from your investments that you could finally quit your job?

Creating cash flow through real estate and investing and stocks is an excellent way to put your money to work and achieve your financial goals. This is a big topic, but we’re going to cover some of the basics so you get inspired and informed on how to start creating cash flow.

Types of Cashflow: Real Estate and Stocks

Let’s start with this: what is cashflow? Specifically, we are talking about money you earn from something besides your paycheck. So, it is not tied to the number of hours you work in your formal job, but is additional earnings you are receiving through your investments. There are two main types of cashflow from investments: real estate and stocks.

Real Estate cashflow

is typically earned from monthly rental payments or lease payments that you earn from properties you own. After purchasing a house, apartment, or commercial real estate, you rent or lease it to someone who needs the space and can then collect monthly rent. The amount of monthly income can vary significantly depending on the type of property, but let’s say the median gross rent in the USA was around $1,000. Another type of cash flow from real estate is when you sell your investment and receive a large sum of money.

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Cashflow from stocks

is what you earn by investing in the stock market. Some companies pay dividends on their stocks to shareholders, which would be a steady cashflow as you hold the stock. The other way to earn money from the stock market is when you sell your stocks at a higher price than you bought then, earning a profit on that initial investment.

Maximize Money and Have it Work for You

The concept of making your money work for you is simple, but so many people miss out on it! We’ve got to start with the concept that if you are doing nothing with your money (i.e., keeping it in a checking account with zero interest), you are losing money due to inflation. As inflation rises, which is the cost of living, your money will not be worth as much… ouch.

Therefore, you need to be investing in something that will earn at least the same amount as inflation rates, which are currently fairly high.

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Then, take advantage of compound interest by holding long-term investments. This is the way money can truly work for you to grow exponentially through the power of compound interest.

How to Create Enough Cashflow to Replace your Job

Creating enough cashflow from investments to replace your job is an exciting opportunity, but it will not happen overnight. You need to, first, determine your monthly living expenses—how much do you need to live each month? That is the base amount you will need to generate from your investments.

Then, consider your goal income that accounts for your desired lifestyle—this is the goal amount you want to generate.

Finally, look at investment opportunities that will generate enough monthly income to cover these amounts. Once you have achieved that, you are set to replace your day job and live on the cashflow generated from your investments. This takes a lot of work and planning, and by no means is this “easy”.

 

Short-Term and Long-Term Cashflow Goals

It’s important to consider short- and long-term cashflow goals. Think of it in terms of what you want to achieve and what lifestyle you want to have. Short term cashflow goals could look like earning extra income to pay off credit cards, save up for a trip, or pay back student loans. Long term cashflow goals might be to quit your day job, pay for your children’s education, or live a high-income lifestyle.

Once you determine your short- and long-term goals,

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you can seek out investment opportunities that will be lucrative enough to bring in the cashflow you need and want. Continue learning more about cashflow, investments and the many ways to build wealth in the Legacy’s club.

Areas of Review

Takeaway

Big picture takeaway points

  1. There are different ways to create cashflow, but we’re talking about real estate and financial markets.
  2. Enough cashflow could mean no more 9-5 job.
  3. You should have short-term and long-term cashflow goals.

Reflection

Self-reflection questions to think more about the content

  1. What avenues do I intend to learn more about in order to create extra cashflow? Real estate, financial markets, both?
  2. How much cashflow would I need to bring in monthly to replace my current income?

Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!

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