• Create 10% Free Cash Flow in your budget
  • Right-size your current spending


  • Read – Chapter 5, Save Your Way to Wealth
  • Complete the activities
  • Find an extra $300 per month in the four biggest spending buckets

Workbook Download

Lesson 2 – Increase Your Cash Flow

Phase 2 – Increase Your Monthly Free Cash Flow

When Ross teaches people how to analyze investments in the stock market, one of the things he talks about is looking at the free cash flow of the company. Free cash flow is one of the key drivers of business growth and it’s going to be one of the key drivers in your personal quest for a debt-free and wealthy life.

Cash flow is a term used to describe all the income we generate. Free cash flow is what portion of that income is left over after we pay our basic monthly obligations.

Activity 6.1: What is Cash Flow?

If you merely keep making minimum payments on all your consumer debt, it will most likely take many years to pay off the debt and mounting interest. Remember the examples in Understanding How Interest Multiplies Your Debt Obligation in an earlier lesson?

The goal of this phase is to create some additional cash flow from your current income to add to your minimum payments and eliminate your consumer debts more quickly.

Your monthly take home pay, divided by 10 = Your Cash Flow Goal

Goal: 10% Free Cash Flow

Your Personal Goal: ___________

Key Point

You should begin this phase after you have an adequate emergency fund in place.

Example—Jon and Terri

Jon works full time and Terri works part-time. Together bring home $5,000 per month in total income. They have decided to trim their monthly expenses in order to create $500 in free cash flow from their current take home pay to put toward their debts. After some discussion, Jon and Terri also realized that if they took lunches to work several times a week instead of eating out, they could save a minimum of another $150. That’s a total of $650 monthly to apply to their free cash flow bucket.

Activity 6.2: Methods to Create Additional Cash Flow

There is really only two ways to get out of debt fast…

  1. Spend Less
  2. Make More

Most people will have a bigger immediate impact on their financial life by adjusting their spending habits than by focusing their efforts on trying to make more money. The result of adjusting your spending are immediate and the extra cash flow you create in the next lesson.

The great benefit of adjusting your spending habits is that the results are recurring. They provide a benefit each and every month as long as you stick to your plan. That’s just another small way to “compound” your success.

Activity 6.3: Increasing Your Personal Cash Flow

Cutting Your Expenses

Now let’s turn our attention to cutting your expenses. You’ve probably heard many, many times that you need a budget if you want to control your money and your spending. Everyone talks about a budget, but few people really take it serious and create one. Of the few that actually do create a budget, not many actually use it to help them get the upper hand on their money problems. A budget is a powerful tool if it’s created and used properly. A good budget is like a treasure map that leads to financial freedom.

Activity 6.4: Your Individual Expenditures

Part One:

Refer back to the Financial Inventory you performed in Lesson 4, and list all your current monthly payments and expenditures in the form below. List each one individually rather than grouping them in categories – credit card accounts, utility bills, insurance policy, etc.., should all be listed separately.

Part Two:

Now, go through this list one line at a time and identify the areas where you can free up some cash flow from your current expenses. Every time you find an area you can lower, put the new lower payment in the next column and calculate the saving in the next column.  (Do this with a pencil so you can easily make changes.)

Total up the saving and see how much free cash flow you can create. Keep in mind you are shooting for a goal of 10% of your current take home pay in free cash flow.

Activity 6.5: Ideas to Cut Your Expenses

Here’s a brief list of 25 ideas to help cut your expenses and create free cash flow in your budget. For more complete details, refer to Ross’s expanded list in 60 Day Money Miracle.

How many of these ideas will help you create more free cash flow?

Temporarily suspend all contributions to your retirement accounts.

Call your credit card company and ask for a lower rate or payment. Call your cable, dish or satellite TV service.

Avoid the car wash do it yourself!

Limit dry cleaning – launder your own clothing if possible.

Stop eating out for lunch and dinners.

Take a break from golf or other expensive recreational activities.

Mow your own lawn and enlist your children to pull weeds.

Adjust the deductibles on your insurance policies.

Drop the collision and comprehensive coverage on your automotive insurance and keep just the required liability coverage if do-able.

Consolidate your insurance policies with one company. Most insurance companies will give big discounts when you have both your home and auto insurance with them.

Check out books from the library rather than buying them from the bookstore.

Cancel gym membership or other annual subscriptions or memberships.

Try a “stay-cation” this year instead of a vacation.

Stop making expensive solon visits.

Buy generic drugs.

Pay your bills on time – avoid late fees and over-limit late fees.

Buy store brands rather than the national brands at the grocery store. Reduce your child-care expense.

Ride a bike to work if feasible.

Car-pool or ride public transportation.

Use Skype for long distance calls to friends.

Stop smoking – You’ll save money and its more healthy.

Adjust your thermostat – both winter and summer.

Cancel all optional phone services on your cell phone and land line.

The list could go on , but you get the idea. You can easly gind the extra money in your budget if you change a few things and make some sacrifices. You need to free up 10% of your take home pay as quickly as possible to add to your current debt payments to start the rapid debt elemination strategy you’ll learn in the next step.

Remember the four key savings buckets where you can typically find the biggest savings to supercharge your cash flow.

  1. Entertainment
  2. Communications
  3. Insurance
  4. Investments

Activity 6.6: Find Your Extra Money

Phase 3 -Build Your Retirement NestEgg

Once you have all your debts paid off, the free cash flow you now have can be used to build up an impressive next egg that you can invest for retirement and use to enhance your lifestyle.


To summarize, in the first 30 days you need to put aside in a safe liquid place, like bank savings account, an emergency fund equal to one month’s take home pay. After you have all your consumer debts paid off, you’ll want to increase that to 3-6 months of your take home pay. Emergencies happen and when they do, you’ll be prepared to deal with them without increasing your debts.

You will also need to increase your monthly free cash flow to 10% or more of your current take home pay. This money will be used to accelerate the payment of your debts.