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.
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.