Do you know how you spend your money?
I don’t just mean the big purchases, but every single penny? In order to succeed, you must! In reality, you should need to vicious. Try looking at this case in another way. Let’s say that you receive a paycheck every week for $1000. You open the envelope each week and there you find the $1000 check. But one week, when you open the envelope, you find only $900.
What would you do? I suspect that you would be on the phone and finding out where the missing money went. I want you to become as attentive to your outflow as you are to your inflow!
The first thing you will need to do is take the time to list out your fixed and flexible expenses. Fixed expenses are items such as rent, mortgage, car payment and other regular installment payments that basically stay the same each month and for which you are committed for a period of time. Flexible expenses are the expenses that change from month to month such as food, clothing, and utilities. You have a bit more control over some of these items.
In order to create residual income, you are going to have to create an asset base, and to do so, you will have to consider reallocating your expenses. You will need to pay yourself first and NEVER dip into your asset money. Never, ever spend the principle. Don’t say you don’t have enough money. If you do, shame on you! Do something about it. Make more or spend less. This needs to be a zero sum game to some extent.
This means that you are going to have to take a look at how you are spending your money. Yes, every penny. As a people, Americans over consume. I am not suggesting that you should take draconian measures and live like a pauper for the rest of your life, but it may be necessary to make some adjustments.