For many years this was a huge challenge for me, I was that person who lived paycheck to paycheck, and even though I know I was earning enough, it just never seemed to turnout that way. Although, this will continually be a learning process for me, who am I kidding, a submitting process for me, I found a great article that can help us all. Once you have positive financial health then you give your business room to grow and flourish.
Get Rich Slowly
Cash flow basics
To gain wealth, you must spend less than you earn. This is the fundamental law of money. Framed in terms of a mathematical equation:
[WEALTH] = [WHAT YOU EARN] – [WHAT YOU SPEND]
This formula tells us two things:
- If you spend more than you earn, you are losing wealth — you have a negative cash flow.
- If you spend less than you earn, you are accumulating wealth — you have a positive cash flow.
The greater the gap between earning and spending, the faster you lose (or accumulate) wealth. There are only two things you can do to increase your cash flow: spend less or earn more. (Or both!) This seems obvious, I know, but smart personal finance really is this simple. Everything else — paying yourself first, investing ten percent of what you make, building an emergency fund — is done in support of this fundamental law.
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