3 Rules You May Overlook to Always Have Cash (And Multiply It)
See if you’re applying them.
“Cash is no longer trash”, says Ray Dalio.
It never has been. Having a couple of thousand in your account gives you a sense of security for tomorrow.
You should make enough money before you say it’s trash.
Here’re 3 rules people accidentally overlook to make money.
1. Cash Flow Is King
People say debt is bad. Don’t take this seriously. The Devil is in the details.
It’s bad when you buy a brand new $80,470 Model S Tesla for private use on credit.
It’s good when you buy an asset that produces cash flow you use to pay it back.
My friend Victor is in the real-estate business. He buys apartments, refurbishes them, and rents them to students.
It’s more profitable than renting to families. You make more money by renting individual rooms. Victor taught me to think of real estate in terms of the price per room.
He’s obsessed with the idea of financial freedom. The cash flow he generates slowly pays off his three mortgages and puts 300 EUR ($330) into his pocket every month.
I like hanging out with Victor. He makes me think out of the box.
Building wealth makes you better at managing your finances beyond paying off your debt. You can’t but bring your spending under control. Otherwise, the bank will remind you of your financial obligations.
That means you have money left at the end of the month.
The goal is to live off the cash flow from your investments. They add to your monthly wage. Victor uses debt to earn more.
His extra 300 EUR don’t elevate his standard of living now. But as inflation stays, he’ll hike the rent and make more money. Plus his property will appreciate.
The best part?
He’ll never have to work again.
Use good debt to boost your cash flow.
2. Your Money Will Devalue. Your Assets Will Appreciate
The 2020s are turbulent times. Inflation hasn’t been this high for decades.
Every skeptic has realized your money loses value faster than a melting ice cube on a hot summer day. People in developing countries have a better notion of this.
My home country, Russia, has experienced two financial crises over the last 10 years. The ruble has devalued three times.
What do people do when the national currency takes a deep dive with no hope for a better future?
They rush to buy something that’ll keep its value. People stand in line to get a TV or an apartment.
My former classmate bought an apartment last month. It took a week to close the deal. The apartment’s price went from $130,000 to $144,000 by the time they signed the contract.
That’s an 11% price hike. In. 7. Days.
I do the mental exercise of going back a couple of decades to rethink my attitude to money. What should I have invested in?
OK, I got over the small personal personal crisis of not buying Bitcoin in 2011. But we’ve had more opportunities to multiply our capital than a fisherman has with a bait in a teeming lake.
Real estate? Appreciated.
Stocks? Many appreciated.
Precious metals? Strongly appreciated.
The bottom line is not to focus on now. The future is the goal. Because it’s unknown.
You should take money from your present self and give it to your future self.
You can survive a 9% inflation now. How about a 15% inflation in a decade along with an obligation to provide for your aging parents and kids?
Even the US experienced such inflation, let alone less prosperous countries.
Invest to protect yourself from economic uncertainty and financial emergencies.
3. The People You Hang Out With Will Make You Wealthy
This one isn’t obvious.
Just as toxic people slow you down, positive people make you shine.
Choose your friends and life partner carefully.
My friend investing in real estate motivates me to learn about new income streams without telling me to do so. Seeing him get rich right before me is a powerful motivator.
I imagine how much we could make together if we were pursuing the same investing goals.
Collective work is like compound interest. Two people working together can more than double the result.
Keith Ferrazzi’s book Never Eat Alone taught me to never avoid social events where I can meet people pursuing similar goals.
Some of them will turn into your friends if your interests align. Being a fan of science, I make new contacts at conferences and workshops.
My initial reaction is to say ‘no’ to taking part in large gatherings. But then I switch on my rational thinking and realize I can learn something from my new acquaintances.
The challenge is to reveal a bit of yourself to others. You have to show your vulnerable side and state your interests.
I talk about my view of personal finance and listen to what people reply. Most aren’t interested in growing wealth but a few confide their fears and experiences.
My electrician colleague turned into a millionaire after holding stocks for 30+ years. His wise advice helped me grow my portfolio in 2022 when just about everyone was panic-selling stocks.
Money isn’t the goal, though. Building relationships is.
People control money flow. You should interact with people to understand how to make money.
This isn’t to say you won’t figure it out on your own. You will. But it’ll take longer.
The right people in your circle will help you understand where money flows.
The Bottom Line
It doesn’t take a genius to build a life free of financial worries. The recipe is to
● Generate more cash flow
● Buy assets
● Talk to new people
Get used to following these and cash will never be an issue.