Tuesday, September 13, 2011


Step 3. Reduce Expenses and Increase Cash Flow:


-> Increase cash flow by reducing expenses on unnecessary wants.
Know your Wants from your Needs. (Understand that having income generating Savings/Investments should be considered among your "Needs" because these instruments will support you during the time when you will have no more active income.)

-> Pay Yourself First / Budget to Save.

Create a budget which will require you to allocate a portion (Ex. 10%~20%) of your monthly income to Savings/Investments before spending your income on your monthly necessities.

Expenses = Income - Savings (Correct), 
Savings = Income - Expenses (Incorrect).

-> Stick to the Budget.

-> Payoff Bad Debt (and Stay Off Bad Debt).
Pay off bad debt which requires you to pay interests to the lender. Eliminate these unnecessary expenses by paying off the debt as soon as possible.
Stay off bad debt by avoiding borrowing money to buy unnecessary items/wants which will burden you with additional expenses to maintain or support the items/wants.

-> Do not live beyond your means.  

-> Buy Assets instead of Liabilities.
Increase cash flow by "spending" on items that will add to your income. (Buy income generating assets instead of income depleting liabilities.)
Having passive income generating assets will allow you to have an alternative source of income that is not dependent on your effort and will later provide for your needs when you cannot work anymore.

-> Start NOW!

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