6 Absolute Necessities for Acquiring Long-Term Wealth

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Six essentials that I call the Six Circles of Wealth operate in conjunction to provide long-term and rock-solid wealth. And an optional seventh provides a huge bonus.

The six are positive cash flow, investments, guaranteed income, liquidity, long-term care and your legacy. The seventh is business ownership and the eventual sale of the business. We will break down each area for the next seven Wednesdays.

The Flow of Cash

A positive cash flow simply means that you have more income than expenses month after month and year after year. It is not gross cash flow (although the more you bring in, the better off you generally are), but net cash flow.

Say you and your spouse have a gross household monthly income of $9,000. After taxes, Social Security and the other mandates, your combined adjusted gross income is $6,000 per month. From this adjusted gross come out all your expenses, such as housing, autos, utilities, saving for retirement, groceries and entertainment. This example yields $800 net positive cash flow.

Take 45 minutes and add up all your income and all your constant expenses and see how positive -- or how negative -- you are every month. Set aside 5 percent of your income (out of your checking account) for unforeseen expenses, such as the hot water tank blowing up or the roof leaking. It has been said that life is just one darn thing after the other, so plan to have a cash reserve for them.

If you determine your cash flow is negative, then the first thing you should do is anything that gets your cash flow positive. The best and fastest way to do that is to cut your expenses. My fellow DailyFinance contributor Brian O'Connor has written a series of articles on how to save $1,000 a month. I recommend you read these and pick out a few gems you could use.

Make More Money

The next step is to make more money. This is the greatest time in history to start a simple small business from your home. You could also plan for a new job and maybe even a new profession. Or you can make more money in your current job. Before you ask for a raise, spend the next 90 days and make yourself more valuable to your boss and to your team. Your pay is very much associated with how much value you really bring to the table for the employer.

Your boss and coworkers do not care that your cash flow is not good. They only care what you can do for them, so prove you can do more and should be paid accordingly. It has been said that most employees do just enough not to get fired, and most employers pay just enough so you won't quit. Make a commitment to yourself that you will go the extra mile at work.

Start by checking your attitude and monitor self-talk at all points during the day. You hate your coworker? Find things you can like, focus on those points and build a bridge to your coworkers. If you do this for the next 30 days, you will change for the better -- and your boss will notice. Follow through hard for another 60 days and really change people's perception of you to an integral part of their operation. Track all the extras in your journal.

Now Is the Time to Ask for Your Raise

Set up a time to speak with your boss and come into the meeting and say how excited you are to be with the company and how much you like working on whatever you are doing. Now ask for your raise based on the last 90 days. Ask for more than you think you will get, but only you can know how much that figure is at your company. Many times you will walk out with that raise, and if you don't, ask your boss if you could have another meeting in 60 days to review. During that 60 days, become more valuable and keep asking until you get your raise. If it does not happen, start a job search for another position with the company. This would also be a good time to start working on your own small business.

A strong positive cash flow is the first requirement for creating wealth and a fantastic future. So look hard at your expenses and your income and work at increasing your positive cash flow.

John is the best-selling author of "The Perpetual Wealth System." Check out this week's featured video.

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It's encouraging to see long term care on this list, because so few people are aware of the huge financial risk it carries. Planning for long term care is vital to a successful retirement, because you can't predict whether or not you will need care later down the road. Long Term Care Insurance can help you protect your assets from the high cost of care, but the key to buying a policy is applying when you are still relatively young and healthy, to ensure the lowest rates. You can find out more about planning for long term care at ltctree.com

April 10 2014 at 12:58 PM Report abuse rate up rate down Reply
Karen Lorenzo

The key to planning for long term care insurance is to keep on saving money, we all know that long term care insurance does not come cheap, so if you have the resources and you can keep it, then you should be able and you must get one.
The aaltci has provided ways to deal with premiums hikes, so does other independent organization for long term care insurance like infolongtermcare.org and longtermcareinsurance.org. Once you recognize the significance of the product, you must also realize the significance of planning for it. Keep saving money, add money to your retirement and spend less on things you want and focus on things you need

April 08 2014 at 10:38 PM Report abuse rate up rate down Reply

Fake it till you make it

April 02 2014 at 9:26 PM Report abuse rate up rate down Reply

Action talks bullshit works

April 02 2014 at 9:26 PM Report abuse rate up rate down Reply

Yes Virgina, the Stock market is rigged! The Fed reserve and our government make sure of that. So, I got out of the stock market. Stay liquid! This means not spending more than you make. Save money each month, even if it is only $25.00. This set the pattern for savings and keeping expenses below your income. This takes discipline. Just like over-eating, spending less than you make is the key to having more of it. Not eating more than your body needs is the one sure way to lose the body fat that you do not need. There may be medical reasons for weight gain, but the biggest problems is over eating and eating the wrong things. Most over weight people use the medical excuse or well God made me this way.....Just like poor people say that it is not their fault that they use their money for drugs and booz!, instead of saving for school or buying a can of paint or mowing their lawn. Poor people have make poor choices and have poor habits.

April 02 2014 at 7:27 PM Report abuse +2 rate up rate down Reply
1 reply to Mr. ROC's comment

I agree with the second half of your statement.

April 02 2014 at 8:05 PM Report abuse rate up rate down Reply
Roxanne Whittum

9 grand pie in the sky while back on earth, the reality is Do I eat today or ?
Otherwise a good article to enable someone to start to take control of their situation. A great action plan and steps to take to further one's progress. Looking forward to more articles.:)

April 02 2014 at 7:15 PM Report abuse +1 rate up rate down Reply
1 reply to Roxanne Whittum's comment

The only way to succeed, is to have a plan. No plan, no success.

April 02 2014 at 8:04 PM Report abuse +1 rate up rate down Reply

Most people in America can barely eat, afford utilities or save. Americans have a negative saving rate. The majority are in debt and cannot find meaningful or long term work.

So why this article? To support the capitalist system through propaganda.

This is the Wall St. talking point to get you to believe the system is not rigged and you have a chance.

April 02 2014 at 6:51 PM Report abuse -1 rate up rate down Reply
1 reply to weilunion's comment

Debt! There is the problem. You do not NEED debt. If you have it, you are struggling.

April 02 2014 at 8:03 PM Report abuse +1 rate up rate down Reply