Definition of Discretionary Cash Flow
In it's simplest form, discretionary cash flow - often also called free cashflow - is money over which you have complete control. You can decide where and how to use it.
Rather than giving you the same information as in the free cashflow definition, let's look at the principles of increasing your discretionary cash flow.
Our Cashflow Pipe diagram shows that discretionary cash (or free money) is your total income (passive income plus salary) minus all your expenses.
Definition of Discretionary Cash Flow Applications
3 Ways to increase discretionary cash flow
Increase your pay check
Most of us, by instinct, see only one answer when looking for ways to increase our discretionary money. That's increasing our income. In fact, it's become almost an automatic reaction to take on a second part time job, or to put in more hours at your current job.
Although this option works, it's also the most difficult way of doing. It also keeps you trapped in the time-for-money trap.
Fortunately there are easier ways of getting the same result.
Reduce expenses
If you've been working for a few years chances are that you're earning more than when you started. Yet, you still have too little or no free money.
It's a natural thing for people to increase expenses as their incomes increase. We simply buy more luxuries.
If you closely look at your expenses, there are ones that you can immediately cut back. Problem is, you and I tend to make emotional decisions when it comes to money. And somehow we always find excuses why it can't be done.
You may not like what I'm about to suggest, but ask a friend or family what expenses you can cut back. And then do it!
Oftentimes an outsider is the best person to make a totally objective decision.
The quickest way to increase discretionary cash flow is by reducing expenses...
that applies to you and me as well as in business.
Increase passive income
This option is the most difficult one to do. But if you can keep your expenses under control, it' surely the most rewarding. And in my opinion, the best route.
Only problem is, increasing passive income isn't a short term solution. It takes time to see significant results. But it also holds many other major long-term investment advantages.
Increasing passive income is THE option if you plan on building and increasing your free cashflow and wealth.
--------------------------------------------------------------------------------
Once you've increased your discretionary cash flow, the real trick is to reuse it to further increase your income. The ultimate goal is to build a permanent income stream that keeps on flowing into your account - regardless of whether you work or not.
I strongly suggest you click here for a few tips, tricks and strategies to build your permanent income stream.
Source: http://www.cashflowclever.com/definitionofdiscretionarycashflow.html
No comments:
Post a Comment