Candidate,
For the fortunate people who've maxed out your savings and you're looking for the next financial step, let's talk about your options.
If you were in a closed-door room with your financial peers and you could ask anything — no jealousy, no "weirdness" from friends/family who don't understand your situation — what would you ask?
I asked you guys this question a few weeks back and this is what I saw:
One reader asked about how to increase cash flow.
"Other than starting a side-business, what are the best investments I can make to in the name of increased cash-flow? Dividend stocks/indices vs income property, etc? Best way to start, assuming I'm totally debt free and already maxing out retirement accounts?"
My answer: You have a lot of options...
You might be surprised to hear me say that you can cut costs to increase your cash flow. Typically, the people I know who are maxing out retirement accounts make a considerable amount of money — 6 figures, often multiple 6 figures. Depending on their spending, I can often find $1,000/month to $5,000/month that they can cut without much difference to their lifestyle. That's $12K to $60K of cash flow right there.
(BTW, this is normal for high earners who have rapidly increased their income: You're growing so fast that you haven't stopped to focus on expenses in a while. This is a good time to do that.)
Other options:
- You can invest in cash flow-positive real estate (note I said cash flow-positive, not "buy a house to live in and pray it's actually an investment")
- Or you can invest in dividend-yielding stock
- Or increase your income at work using my negotiation techniques
- Or, my personal favorite, you can start a business
The larger question I'd have for you is: Why focus on cash flow vs. increasing your overall net worth? For example, in exchange for more cash flow, are you willing to accept lower returns on your investments? There are pros/cons to both, but it's something to consider, and I'd urge you to focus on your overall financial picture, not get tunnel vision about cash flow.
* * *
"I have friends who make basically the same income and yet live a playboy lifestyle. I am jealous that they're traveling to countries every two or three months and living large between while I put away 25% of my gross income each month to retire. So at what point do other people say, 'I'm saving enough, and it's time to spend some cash on me?'"
My answer: I'm going to give you two answers. One is the easy answer you think you want. The second is the real answer that you actually need.
First, if you're saving 10% of your income and investing 20% of your income, you can start spending cash you want on yourself.
See how easy that was? You wanted a simple answer, and saving/investing 30% of your income puts you well ahead of your peers. There you go.
The second answer — the real one — is much more complicated. That's because your question isn't really about your friends. It's about you. What kind of lifestyle do you want? What if I told you that you could travel 2-3 months just like your friends right now? Would you actually want to?
So many of us get addicted to being the underdog, or even the victim, that it becomes our default life pattern. I remember working at my last startup and never having enough engineering resources to run the kinds of marketing campaigns I dreamed of.
One day, my boss pulled me aside and said, "Ramit, I don't ever want to hear you using engineering resources as an excuse again. Next time you have an idea, make the business case. If it's good enough, I'll give you all the resources you want."
I went back to my desk in a daze. Suddenly, the crutch of "not enough resources" had vanished. Now I was only left with myself.
Dude, if you really want to travel 2-3 months/year, you can. And if you want to live a baller lifestyle, you can. But it means you'll have to take a hard look inside and make some conscious choices.
What kind of lifestyle do you want? Get specific: Where do you want to travel? What kind of hotel do you want to stay in? Business class flights?
What are your other financial goals? When do you want to retire? Do you want to buy a house? When?
Finally — is it worth it? Some people earn so much that they can do all of this, all at once (most people find this hard to believe since they don't know someone who earns this much). Most people don't, so they have to make conscious choices about where to spend their time and money.
If I sat down with you for 15 minutes, I could help you find out what your goals are and how to use money to make those goals a reality. Since I can't sit down with every one of you, I created a course on Advanced Personal Finance. I recommend you join.
* * *
Other "closed door" finance questions I saw...
- Where do I look for good advice? Everything seems so basic.
- How do you find investment opportunities outside of the standard stocks, funds, bonds etc.?
- What percentage should you really be saving if you make 6 figures? Or more?
- How should my asset allocation change as my net worth rises?
- Is the real estate equation different if I have everything else covered?
- How do wealthy individuals manage their money?
Good questions. We answer all of them in our course, How to Win the Game of Advanced Personal Finance.
When you join, you'll also learn:
- How I use a "Personal CFO" to manage all of my finances — stress-free — without losing control
- The psychological changes of managing money at advanced levels, including how I think differently about saving, investing, and spending
- Advanced tax optimizations
- 30 important life events that present opportunities to optimize taxes and take advantage of investment opportunities
- How I work with each member of my personal finance team — including my Personal CFO and accountant. Plus, real examples of building your own team of advisors
- The red flags to watch out for when hiring a CPA or other financial advisor — don't ignore these
- How much you should spend on your financial advisors (don't spend more than this!)
- The 3 most common invisible scripts that hinder Advanced Personal Finance — and your happiness
- How to "lean into" where you want to spend more — whether it's convenience, luxury, travel, charity, or relationships. Including detailed examples
- Why the key levers of the CEO Mindset are the keys to Advanced Personal Finance success
Click here to see the complete list of everything I've included in How to Win the Game of Advanced Personal Finance.
