What cash generation techniques can we apply in a modern economy? There are answers. Only if we learn to look closer at what we already have.
Photo: The Australian Business Review
Right now, people around the world are capitalising on their creativity to generate cash. That’s because world economies are changing at a rate faster than people can adapt. With resilience being the key to modern-day survival, we can find opportunity by looking back at history.
In a sense, we’re going back to the basics. If we look back, we’ll uncover that some of the solutions we’ve been looking for to generate cash lies in our own backyard.
Let’s take a look at 8 of the modern ways at which we can generate cash and generate wealth as a consequence.
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YOUR READING NAVIGATION GUIDE Getting A Job | Growing Your Savings | Minimising Your Tax Obligation | Growing Your Equity Tapping Into Your Parents’ Equity | Touching Your Superannuation | Using The OPM Sell Stuff | Free Event: Naomi Findlay Live
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1. GET A JOB
Most people are wage earners. They have a job. More than half of the world’s population generate cash by exchanging their time. Time for effort or time for money.
Is it enough?
When you want to increase your income, you should do whatever you can right now. If that means working earlier, staying later, accepting more responsibilities, or asking your boss for a pay rise, do it.
Because here’s what I know: the number of people who turn down the opportunity to do overtime work is staggering. I have seen it all throughout my life. But I would take it. Just that extra $50 a week of overtime can make all the difference to you increasing your income.
Maybe you also need to get another job. Or maybe a part-time job. There are many options for you. I’m sure you’ve got them yourself, but the common tool for cash generation is still holding a job.
2. GROW YOUR SAVINGS
If more than half of the people around the world have jobs, then they’d have to have an income of some sort. Some people get benefits from the government, too. But what they do is they blow it all – they spend it all!
So remember is this: it doesn’t matter how much money you earn. What matters is what you do with it.
A famous book, The Richest Man In Babylon, says ‘a part of what you earn is yours to keep, and you start with 10%’. Well, the wealthy people I know invest 70% of what they earn and they live on 30%. They completely reverse the formula! So if you haven’t started saving yet, you should start right now.
3. MINIMISE YOUR TAX OBLIGATION
Every dollar that can stay in your pocket is better because it helps optimise your savings. In effect, it can increase your income. So we’re going to look at minimising your tax. How do you do that?
You can talk to a fantastic and qualified accountant, but you can also ask wealthy or successful people about what they’re doing. Trust me, they’re out there looking to legally minimise their obligations as they move forward.
So how do you minimise tax?
For example, instead of being an employee, maybe your business would hire you back as a consultant. In effect, you would have your own business, so to speak. The difference is the business would have to pay you the full amount of whatever you negotiate. And then, you’d need to take away the expenses, withholding tax, super and all that sort of stuff you need to.
The benefit is that many of your work expenses that currently may not be deductible could then become deductible. Still, you need to check that out with a qualified accountant.
Another option is what I commonly encounter in my events. Each time I ask property investors whether or not they have a professional depreciation schedule done on their investment properties. A lot of people answer that they don’t have one, or they’ve had one done by the builder.
You should know that the government allows you to depreciate the value of the property, together with its fixtures and fittings. Having a builder do it is not the same as having one done by a professional. So don’t leave money on the table.
4. GROW YOUR EQUITY
If you’re a property investor or if you own a property, chances are, you may have some equity in that property. Equity is the part that you own. Not the mortgage, the bit that’s left over and maybe you can draw down on that.
Some people don’t know that you don’t have to sell the house or the property to access that equity. You can go and get it re-valued. You can draw that equity down and use that, spend it, invest it, do whatever you want with it (talking to your accountant of course).
Many people have money there that they don’t even know because the market has risen in some areas or they thought they even had to sell the property to access it. So you want to access equity if you need the cash to get started.
5. TAP INTO YOUR PARENT’S EQUITY
We’re starting to get into some interesting areas here. But maybe it’s your parents’ equity that you can access. Often, they will have a house or an investment property that has a lot of equity in it. In some cases, they don’t want to do anything with it, they’re not motivated to, or they’re at a different phase of their life – or whatever!
I’ve seen many people help their children enter the property market – and various strategies to access their parent’s equity. That’s another way you should check out. It might not be your parent. It can be a relative or a very trusted family friend. You might want to check into that.
6. TOUCH YOUR SUPERANNUATION
Technically, it’s your money, you know? There are rules around it, but you might have a nice bundle of cash there. These days, things are quite flexible, particularly with self-managed super funds. Maybe you can do more with that super than is currently been done there.
A self-managed super fund might be something for you. It enables you to access that cash and then invest it as you want. That money is already in there, and chances are, you aren’t getting it out before the age-defined benefits that you’re allowed. So maybe you can optimise that while it’s in there.
7. USE THE OPM
OPM. Some people call it OPIUM – and some of the markets around the world might be overdosing on this right now. It’s called Other Peoples’ Money.
For many people, it doesn’t always have to be their money. It can be other peoples’ money. Many property investors understand that to be a banks’ money – a lending institution that they access and borrow against.
But, ‘other people’ can also be a trusted family friend, it could be a personal family friend, it could be family members, it could be anyone else that you can think of. It can also be someone who wants to partner with you, invest with you or do a deal with you to get an outcome.
Now, you need a certain degree of knowledge to pull this off. Not everyone is going to trust money with someone who has not demonstrated results. They know what they’re doing. That’s where you’ve got to get busy, do the work and apply yourself and prove yourself to be someone worth investing in.
8. SELL STUFF
If you can sell stuff, you can turn stuff you already had back into cash. That can be a whole lot of stuff. Maybe there are appliances, or old toys or golf sets or surfboards or whatever.
You know, according to eBay, the average Australian household has over $2,200 worth of stuff that can be converted back into cash. I could traditionally say garage sale, but I guess eBay is the way it’s done these days, along with various online auction sites.
Although don’t discount garage sales. People still love to view and touch and all that sort of stuff, and that could work as a very cost-effective way for you to do it as well.
Also, in view of living a frugal lifestyle, maybe you can have your car downgraded? You need to free up cash and do whatever you need to do to generate cash.
Maybe you could get a cheaper car? It’s totally possible. Maybe you can go through your wardrobes, go through your garage, go through your house – anything that you don’t need, anything you don’t like, anything you don’t enjoy, maybe you should convert that back to cash.
So there you go – the 8 quick ideas of the very beginning of your wealth generation journey and that is to generate cash.
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