Money on tap: how to create a cash flow pipeline
Published in the Womens Agenda, February 2013 by Janine Cox
Imagine if you could simply turn on a tap whenever you needed money and it just poured out in whatever quantity you wanted. Turn the flow down when you need a small amount of cash and open it right up when you need more.
If this was actual reality then any concerns you might have about money would be a thing of the past and you would feel secure in your financial future.
But what would you do with the money? Most people I ask can list four or five things they would do without giving it a great deal of thought. The challenge is that the majority of people struggle to ever get enough money to get those five things. At least, not until they've learnt how.
Below are some steps to take for creating your own cash flow pipeline.
1. What do you want?
To get what you want, you need to first imagine what it is. This is what I call documenting your WHY.
Let's say your big WHY is to free up your time so that you can spend more of it with family, or travel to fascinating places. Being clear about what you want gives you the ambition to get it. Figuratively speaking, the bigger the carrot and the more clearly you can see it, the more likely you're going to do what it takes to get it.
Let's face it, I know that if I had to save $20,000 in the next 12 months, or face losing my house (the big WHY), I would find a way to get the cash.
2. Goal setting
Once you have your WHY, the next step is to work out what action you need to take to get it. Setting goals will allow you the freedom to focus on exactly what you want and help you avoid being distracted by what you don't want. These goals can be broken down into smaller ones to make achieving the end game much easier.
Tips for writing goals
They must be:
- Specific: be clear about your goal
- Measurable: know when you will achieve it
- Realistic: you need to believe it is possible for you to achieve
3. Write your own pay cheque!
Firstly, work out how big your money pipeline needs to be by listing all of your expenses and income over 12 months. Decide how much money/income you would like to have and determine the gap between where you want your income to be and what you currently have. Now you need to write down how much spare cash you will save to invest each month. These cash amounts are what you need to build your pipeline.
4. Seek investments
Identify a vehicle that can both generate income and capital growth as the best investments cover these two outcomes. In my experience, the easiest place to create cash flow is the share market and now is the right time to be investing as the market has just been through the biggest correction in 40 year – meaning the risk of investing now is significantly lower than before the decline in 2007.
5. Gain insight
Start building up the knowledge you need to create the wealth. A lack of knowledge is the single biggest reason why many people fail to create their own cash flow tap. People with the right knowledge understand the importance of having a plan, why they are buying or selling, and how to manage the process. Read Tanya Manwaring's story as to how she switched from PA to property development to share trading – a great example of a woman who created her own cash flow pipeline.
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