Hi everybody!

This is the first article in the Cash Flow While You Sleep series about investing, managing personal finances and creating passive income - an extremely important factor in achieving financial freedom.

Passive investment

“If you don't find a way to make money while you sleep, you will have to work until you die.”

That's a very famous quote from Warren Buffett that everyone has probably heard. Ignore the argument if you only understand it literally and think that working is not bad, people who don't work will be very bored, and live meaninglessly.

In my opinion, we should understand the meaning that having passive cash flow will help you make money even when going out or taking time off work so you don't have to use time to exchange for money anymore.

Most people want to have passive cash flow, money that makes money, but not many people achieve this because it takes more time and more perseverance.

And one of the extremely important factors that is always overlooked is: SAVE

What I mean by saving here is that you save, not that you save in the bank, everyone.

This world has many things we cannot control. Life is full of risks, accidents, and losses. No matter how careful you are, no one is sure if it will happen to you or not. In investing, there is no guarantee that an investment strategy will always be effective, a good investment can suddenly fluctuate sometimes just for a silly reason that no one expected.
Even though I still say that I will invest according to the W and M framework and believe that the market will always increase in the long term, it is still impossible to know how long the market will sideways and downtrend, nor can it be predicted. Unexpected events, when candles poke down or pop up.

However, there is one thing that each of us can control financially: personal savings and a frugal, minimalist lifestyle, and this 100% will help you control and bring about. financial effects now and in the future.

Simple equation for wealth accumulation:

Accumulated wealth = Income – Expenditure

Wealth is the accumulation of things left over after you have consumed inputs.

So we:

  • It is always possible to accumulate wealth without having a high source of income.
  • have a high source of income but also do not have the opportunity to accumulate money without a high proportion of savings in their daily life.

However, the value of wealth is also relative to what you need.

Suppose I invest with a profit of 10% a year, another person invests with a profit of 15% a year, but I only need to spend half the amount that this person spends and I will have enough happiness while Their lifestyle increased as quickly as their wealth.
In the end, the amount of wealth we accumulate over time is always greater even if our income is less. I get more benefits from investing than this person even though I invest less.

And in the equation I wrote above, the truth is that saving is more effective, and the control you have is better than growing your salary because you can't always knock on the boss's door to ask for a raise. good salary.

Sometimes trying to increase our salary hastily causes us to take unnecessary risks in terms of money if we risk borrowing money, and in terms of health if we work hard overtime instead of saving with risk. 0%.
By saying that, I'm not advising people not to increase their salary or income, but to just live like a Zen master to save money. I just want to emphasize the importance of saving so that we can harmonize the two in terms of generating income and increasing the proportion of savings higher.
The truth is that big investment returns and big bonuses give us great feelings when we achieve them. The truth is that we often put so much effort into one side of the equation that we forget to put effort into the other side.

The benefits of saving

Saving money and living a more frugal lifestyle will bring you many benefits

Protect yourself from the unexpected
This world always has things that you cannot predict, such as pandemics that make the whole world reel for several years, wars, or suddenly planes crashing into the twin towers on September 11, causing crisis. happened, many people lost their jobs. Having savings will be like a fence that protects you from unforeseen things.

Be in control of your own time
Saving gives you flexibility, the ability to wait for opportunities and take them. It will give you time to think when making a decision. Flexibility in everything when having some savings can give you options to change careers, retire early, and have the freedom to not have to worry about anything.
And this value to me is so great that it cannot be priced.
In addition, if you really want to set a price, you can't because if you have flexibility, you can wait for the right opportunities to come to you and it cannot be measured in the same way as calculating interest rates of some % banks. .
I still remember before when I mentioned on a video that I had a lot of cash in % at that time. Someone commented very harshly saying that I still make videos about investing and that cash always loses value because of inflation and all. At that time, Crypto and Stock were increasing rapidly, I was just waiting for an opportunity to come like the recent coin drop.
Sometimes the flag comes to hand, it's just a matter of whether you still have the capital to raise it or not.

Learn to be happy with less money

This sounds very simple, but I actually think maybe we all need to learn this. And I always need reminders to pull myself back into this without following the inertia of those around me. Because we live in society, with relatives and friends, not a monk in a temple.
That is, it will be easier for me than for my friends, for those who have families and children, it will be twice or three times more difficult. Because changing habits and living more frugally will affect more people. .
However, to have a better financial future, we must try a little bit more every day. Initially, let's save our own expenses first instead of expecting our loved ones to do the same. In fact, when we learn how to be happy with less money, our lives and emotions are much better because we are less dependent on material things, or concerned about the views of those around us. When your loved ones see you happy and loving life more, they will automatically change.

In fact, sometimes we spend more money reflecting how we spend it to show people that we have (or used to have) money.
If we encounter thinking this way, the best way for us to increase our savings is not to increase our income. That is to increase your humility.
Personally, every time I realize that I'm spending something wastefully, when I think back, it's because in my mind I want to prove to others rather than bringing value to myself. And I will adjust it myself.
Because in the end, what you need to do is feel happy yourself, do what you want, meaningful things, not try to prove to others when you actually did it and found it unhappy. more, and also not myself.

And one thing I realized around me, society, the world:

People who have sustained personal financial success (not necessarily high income earners) tend to not care much about what others think of them.

A few small tips I have applied can help you save more

Expense management records daily income and expenditure.

There are many convenient applications such as Money Lover, MISA Receipt and Expenditure Book. Previously, I used MISA Receipt and Expenditure Book because its design was convenient and sufficient for me. When using the app, you will find that you do not spend as little as you think, and will understand why you are running out of money and seeing unnecessary expenses. The App also helps you divide your budget for each type of spending to know how much money you have left to spend on that type of service this month.
Later, when you have trained yourself the habit of frugal spending, you can stop using it.

Learn about minimalist living

This is the lifestyle I adopt and has changed my perspective a lot compared to before, which I have shared through articles and videos Drinking tea with Medio

Learn how to save for no reason.

Instead of needing a reason like saving to buy a new car, buying this or that. We learn how to save without the goal of buying or making something. It's just like a habit.

If you still have consumer debt, credit, or installment payments, try to pay them off. And say no to loans.

Shop proactively instead of passively. That means only buying an item when you need it instead of seeing it on sale, because of a sale, or because of an advertisement.

Limit or do not use social networks or watch livestream sales to avoid ads hitting your eyes.

Social networks understand you very well and deliver ads, so seeing it every day will make your brain convince itself that you have a need. In addition, seeing others have this and that causes unnecessary desires to arise. Like I said before, during the Covid period, I used Facebook again, because I thought I was unfollowing and unfollowing negative things. I also thought I was calm enough, but in the end I still couldn't do it, so now I almost don't use it anymore. .

Everyone has heard the story of the grain of rice and the terrible power of compound interest. But compound interest will not happen if a mouse eats all the grains of rice every day.

Continue reading Part 2: Cash Flow While You Sleep 2: Build a passive income stream

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