Cash Flow To Freedom

Since the beginning of the year, I have been talking about my newest big project: leaving for a 1 year trip in an RV. The countdown is now official; we are leaving on June 11th 2016. Therefore, we only have 7 months left before we leave. Over the past few months, I’ve made several modifications to my finances in order to fund this project. I’m sharing this information with you as I want to show you that anybody can do it. It’s not a matter of money, it’s a matter of determination.

 

I didn’t win the lottery;

I didn’t save up for 5 years;

I didn’t benefit from a special program offered by my employer;

I’m not super frugal, I actually need close to $6,000/month to live;

Maybe I’m just a bit crazy…

 

The reason why I can make this project happen is mainly because I focus most of my efforts towards cash flow generation. We rarely hear about cash flow when we talk about personal finance; this is more a business related term.

When you look at a business’ financial statements, one of the most important points is not the revenues or the earnings; it’s the cash flow. The rest could be pure accounting fairy tales; but you can’t play around with the cash coming and going through your bank account. This is literally the blood fueling the business. If there is none, the business won’t run for very long.

 

Leaving Classic Personal Finance Concepts Behind

When we talk about personal finance, we often talk about budget, assets, liabilities and net worth. If I had used these concepts to do my project, I would have to set a budget to determine my savings ability. Then, I would created an “RV project investment account” and invested in it monthly. The project alone requires around $3,000 per month for 12 months or $36,000 for the full year. Add a few extras and you get to $40,000. Since I decided to rent a villa in Costa Rica, add another 12K… and finish the calculation to a $52,000 budget.

How many months, read years, will I have to wait before leaving? Probably something in between 5 and 10 years. In 10 years, my oldest son will be 20, my daughter 18 and the youngest 14… I highly doubt they would leave with us! This is why I had to find another way to finance my project. Here comes the concept of cash flow generation.

 

What is the Difference when Focusing on Cash Flow Generation

Over the years, I’ve realized I’m not the best guy at being frugal. I have a taste for nice things and while I’ve stopped buying stuff just for the sake of it, I still spend a decent amount of money on quality items. For example, I find it more important to buy lots of vegetables, fruit and natural products to cook healthy food than eating peanut butter and cereal each morning (I drink green juice for the record 😉 ). However, buying these fresh products is not about being frugal.

While I suck at frugality, I’m an ace when it comes to generating money. Since the beginning of the year, I have worked very hard to create a cash flow generating machine that will sustain my lifestyle while I’m gone. This machine is my online websites. Through my blogs and membership website Dividend Stocks Rock; I have the ability to generate additional cash flow no matter where I live. All I need is a laptop and an internet connection!

The main difference with cash flow generation is that you focus on the future money coming in instead of waiting to have it in your pocket beforehand. Then again, this is another concept that is being far away from any “sound personal finance advice”. But this is how a business works; it doesn’t wait 5 to 10 years to fund its projects; it invests right away and works on their cash flow to finance the project as it goes. I agree with you; it is definitely riskier than waiting to have your money in the bank account to finance your project. But this is the kind of move that puts me under pressure to perform and this is when I am at my best!

 

Going From $500 To $3,000/month in 12 months

Back in January of last year, my cash flow ability was around $500/month with my online company. We had a rough period in 2012 and 2013 and we have spent the whole year of 2014 to “rebuild” a very large part of our company. Basically, what happened in 2012 what that Google hit most of our blogs by a major deranking it their search engine. The bulk of our business model was based on selling text links and making money through Google Adsense. The business revenue model collapsed by 80% in the span of 3-4 months. The funny thing is that I almost quit my job in 2012 to live full time from my online company… It was a blessing to have not done this!

We then spent several months on building a stronger business that doesn’t rely on selling text links (something that Google truly hates! hahaha!) and doesn’t even require Google traffic at all. Going through such a modification takes lots of time, effort and energy. The worse part is that it doesn’t always generate results!

Fast forward to early 2015, we are now back to positive and had the ability to roughly generate $500/month in cash flow. This “cash flow” is not the definition of my cash flow in my business financial report, but the money I can take away from the company without hurting it. In other words; the dividend I feel I can pay myself with! at $500/month, we didn’t started to pay ourselves dividends (I work with a partner in this company). We started to pay off our corporate debts instead in order to make sure the company was in stellar condition when I will leave in 2016.

Slowly but surely, we have worked on increasing our revenue and managing our expenses closely. When I look at the months of October and November, I now realize that I am now generating $2,000 per month that could be paid through dividends. This amount will “magically” increase to $3,000 as my Virtual Assistant will stop working for a one year maternity leave…This is perfect timing as I will have more time to do her work and I will not have to hurt the financial structure of my company to pay for my trip.

Since I’ll be working full time on the company, my partner and I agreed I would take the full amount from the company to fund my RV project. Yes… I have the best partner in town! At $3,000/month, I’m almost covering all my expenses. In fact, the rest of my expenses aren’t linked to my trip, but to the fact that I’m keeping my house while I travel.

We have decided to rent it instead, but this part isn’t done yet. I will put the house for rent in March next year, leaving me roughly 3 months to rent it. If it doesn’t work, we will leave anyway and assume the cost. This will add pressure to our budget, but I have remortgaged the house and put some money aside to cover for the expenses generated by my house.

 

Final Thoughts

It took me a year of working evenings and nights on my blogs while I work full time at my day job, but it was worth it. After a year of hard work, I can see that my online business will cover most of my expenses while I’m living the dream of my life.

I’m not done yet as my next goal is to bring this cash flow generation machine to $6,000/month to cover for my entire lifestyle and finally reach financial independence at the age of 36. I like that idea; retiring at 35 and reaching financial independence at 36… All that because I’ve quit relying on classic personal finance principles 😉

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