Five ideas to consider in building assets that generate monthly cash flows
If we’ve learned anything from this coronavirus pandemic, it is the importance of having strong diversified sources of monthly cash flow. This pandemic proved that many individuals and businesses could not survive 4 to 6 weeks without the intervention and help from government relief programs.
So, it is important to take a close look at all your sources of cash flow and come up with ways to fortify your existing sources of cash flow, and where applicable, add additional sources of cash flow to protect your ability to continue to generate cash for the foreseeable future.
When building a cash flow plan, you want sources of monthly cash flows that will accomplish one or more of the following:
- Cash flow that can survive any economic situation
- Cash flow that is independent of your time
- Cash flow that is uninterrupted regardless of whether you’re awake or asleep
- Cash flow built around your lifestyle
- Cash flow with the potential to grow from month to month
- Cash flow that is not eroded by commitments to long-term contracts, overhead, debt, salaried full-time employees, etc.
- Cash flow that is location independent
So, what ideas can you employ to generate these kinds of monthly recurring cash flows?
Here are 5 ideas to consider:
1. Turn your ideas and knowledge into recurring income: You know a lot and you likely don’t realize it. You have the experience that is valuable to others. Consider ways you can turn this into a business that provides extreme value to others; never runs out of inventory; needs no staff; pays no rent; stays open 24/7; and pays you while you sleep.
2. Invest in an online business: There has never been a better time to invest in an online business. This is a sector that has been growing rapidly, even before the coronavirus pandemic that just poured fuel to the growth. It will continue to grow in the coming years as the technology to support these businesses continue to improve. Consider creating and selling courses online; building a retail store on Shopify or other similar platforms; selling information products; etc.
3. Buy an existing business: Consider a business that is undervalued and has the potential to generate a strong monthly cash flow that you can purchase. You can then invest in the business to turn it around and increase its value over time by fortifying existing cash flow sources, adding additional cash flow sources, improving sales, marketing, and operations.
4. Invest in dividend-paying stocks: In May this year, I started a process where I now invest in at least a dividend-paying stock a day in my registered savings account. The idea behind this is to create a consistent habit of growing my stock investment portfolio as well as the income generated from these investments each month. And by being consistent with this process, I will have at least 365 assets that produce cash each year. If on average, these assets pay $1 in dividend per year, I will have $365 in annual dividend income from these assets and at least $3,650 in 10 years. And with compounding and annual increases in dividend income, it is likely that in 10 years, the $3,650 may actually be $7,300 per year or over $600 per month. This is income I can earn regardless of whether I’m awake or asleep.
5. Invest in rental real estate: As some of you already know, this is one of my favorite asset classes. It provides an essential need — shelter. And due to the fact that land cannot be created, it is an asset that grows in value over the long-term. If you own one, two, or more rental properties that are fully paid off, you have the potential to generate great monthly cash flow that can fund the rest of your lifestyle.
Consider these ideas and others not listed here and choose one that you like. Focus on building sustainable monthly cash flow from this one source. Once you fully establish that source of income, move on to a second one. Keep doing this to diversify your sources of monthly cash flows.
P.S. I am on a mission to arm you with financial education. That’s one reason I started writing on medium and that’s why I wrote Tax-Efficient Wealth. This book will help you accelerate your wealth in a tax-efficient way. Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.