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5 Secrets to Jumpstart Cash Flow

The tried-and-true principles investors use to be successful

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Summary

  • Know your game plan and be flexible

  • Create systems to automate your business and manage efficiently

  • Seek feedback and eliminate bad habits

  • Find balance in confidence and humility


Whether you’re a rookie investor just beginning your journey out of the Rat Race or have been investing for years, every investor needs direction and motivation. The wealthy have known several key secrets for a long time that can help any type of investor — from day traders to budding entrepreneurs to seasoned real estate investors — perform better, exercise leverage, and make wise investments.

As you read Rich Dad’s “5 Secrets to Jump Start Your Cash Flow” take the time to understand how each applies to your own investments. Don't be quick to disregard any secret as too difficult or beneath you. The most important part is that you hold yourself accountable when putting them into practice. These secrets are proven strategies; learn to use them and you will see greater success than ever before.

Secret #1 - Know Your Game Plan and Outcome

There are two types of investors: educated and successful. Educated investors understand "how" to do deals, while successful investors also know "why". Successful investors not only grasp the mechanics of a deal, but how each investment fits into their strategy.

Without a plan, you'll have a varied portfolio but never go anywhere. It's like grocery shopping without a list - you might find great deals but leave with nothing for dinner.

Know why you are making a deal or investment—education is key. Aimless opportunities can lead to an unfruitful portfolio that won't let you achieve your dream.

To be a successful investor, you must know your objective and how to reach it. Make an investment portfolio that outlines the specific instruments you will use in reaching certain dollar targets over time. Putting together a plan may take effort, but many people neglect proper planning due to impatience. However, if you ask them whether it's wise to have goals and strategies for achieving them, they will always answer the same: yes.

Secret #2–Be Agile

When you start implementing your plans in the real life, you will soon discover that changes need to be made. This doesn’t reflect poorly on your plans; it is just a sign of how quickly the world adapts. You have to alter your approach at the same pace or faster.

Flexibility is key when attempting to increase your cash flow.

To be agile means being fast enough to seize opportune moments while simultaneously having the resources needed to make it happen. If you take too long in coming to a decision with coordination among colleagues, advisors, and research, then you might miss out on something great. That's why it is important not to limit yourself to what you already know.

Agility combines speed and assets into one skill set used for identifying the right time and right opportunity.

Secret #3 – Work ON your investing business, not IN it

If agility is carrying out plays on the field, then Secret #3 is the adjustment made at halftime.

You'll find that when you're so closely involved with all your investments, you might be too focused on specifics and lose sight of the big picture. Taking time to work "on" your business rather than always being busy "in" it allows you to raise your viewpoint and gain a valuable new perspective. No matter whether you invest in stocks, commodities, or real estate, treat your portfolio like it's a business. By thinking with a strategic mindset about your investments and keeping tabs on the overall bottom line, you'll be able to figure out ways to make your investing more successful.

One necessary step in working "on" your business is creating systems. Systems manage—and sometimes even automate—the different aspects of your investment venture. For instance, an investor in real estate could construct a website to automate how they advertise properties and capture data from potential buyers and renters. Another investor may consult legal counsel for advice on setting up the best entity to provide them with the required protection if they get sued. The stock market investor can set up processes which help them closely monitor their investments so that they abide by the plan's "rules", like never risking more than 3% of their portfolio in a single position.

Working "on" the business also lets you pinpoint those techniques that aren't yielding results and are holding you back. A particular practice might generate satisfactory—or even excellent—results right away, but gradually start to diminish over time. If you don’t lookfurther ahead, investments are liable to be forgotten about and use up capital that could have been put towards better use.

Secret #4 – Be Aware of Blind Spots

It can be difficult to recognize a bad habit that is impeding progress. After all, if you do know of an easier way, it's likely that you'd make the effort to change it, right? Unfortunately, most of us are not interested in examining our wrongdoings. And when we've experienced some level of success, we're even less inclined to believe something is off. Consulting the advice of others can highlight these blind spots and enable improvements that weren't previously known.

Discuss both your successes and failures with friends and other investors then really listen to what they have to say. Their words can offer insight as to how to combat certain habits or even biases that may be holding you back. Talking with individuals who are where you aspire to be will assist in deciphering what needs to be let go of so that further development can be achieved. Even small adjustments can lead to significant successes.

When accepting and evaluating feedback, leave emotions out of it. We often disregard observations due to their intimate nature; however, this was not meant as a put down but rather an expansion on a new approach. Although not each opinion is applicable, consider the source and take into account their accomplishments and knowledge related to your unique situation. Is there something valuable in the advice that could help one become a better investor?

Secret #5 – Be Confident and Humble

Albert Einstein famously declared that doing the same thing repeatedly and expecting different results is a form of madness. When it comes to investing, this axiom holds true: if you do not diversify your investments, you will get the same returns over and over again. While stability in investment is desirable, there is potential to increase your returns by pushing beyond your comfort zone. To make sure you are taking the correct steps towards a more profitable portfolio, it is important to believe in yourself and evaluate honestly both what you know and what you need to learn.

Take time to reflect on your progress up to this point. Confidence comes from remembering and acknowledging your past success. As you inventory your progress from where you started to where you are now, you will quickly realize that the next level of investing is not an exclusive club, but the next chapter in your investing story. Realize you do not have to have all the answers before you begin, but you do need to take the first step.

If you wish to stay grounded and realistic, it's wise to make an honest assessment of your achievements. Many people have reaped the rewards of a thriving economy without any unique skills or insights – and then crashed hard once their luck ran out.

Just before the housing market imploded, many unskilled investors made easy money in the expanding markets. Bankruptcy courts are filled with those who got too big for their boots after falsely believing they had developed superior abilities.

Although you should have every ambition to become a high-flyer, don't forget that luck plays a part too. But most “luck” is created through skill, knowledge, commitment, and careful choice of advisors.

By striking a balance between confidence and humility, you will be able to locate and implement investments that are suitable for every stage of your investing journey.

Final Thoughts

The 5 Secrets are beneficial to every type of investor, from novices to veterans. This is because each secret contains an immutable law that will bring success regardless of market conditions, knowledge level, or location. If you work hard to master these principles and apply them correctly in your investments, you will see a much higher rate of success than if you had not taken the time to learn them.

Original publish date: September 20, 2023

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