You don’t necessarily have to be frugal to save money, but you should definitely learn to manage your money. Get familiar with the concept of cashflow. It’s the failure to understand this simple concept that causes many professional athletes to go broke within two years after retirement. Investors that got rich by implementing passive residual income strategies truly understand that cashflow is also important to creating wealth.
Knowing how to keep your money is a lot more important than knowing how to make passive residual income. All the money in the world means nothing if you are constantly spending above your means. Look at Mike Tyson, and Michael Jackson as two prime examples of people that made multi-millions annually but yet they had to declare bankruptcy.
In addition to understanding the concept of cashflow, here are some specific things to look into.
Never buy new cars. I paid $15,000 for a sports car that normally costs $45,000. Cars depreciate $5,000 just from you driving it off the car lot and most cars rapidly lose value over time. Everyone wants to buy brand new cars but you can get some huge deals if you buy low mileage used cars. I remember once a dealer was willing to knock $3,000 off the price of a car simply because it had 3000 miles on it.
Don’t try to “keep up with the Jones'” by getting the latest trends.
Shop during the off season and look for clearance sales. Buy your winter clothes in the summer and buy your summer clothes in the winter. Look for clearance sales when companies are looking to get rid of their inventory in preparation for the new season. You can get discounts of up to 60% and sometimes more by following this method.
Look at all the ways you’re spending money now and find cheaper alternatives.
Shop around for cheaper car insurance.
Most insurance companies raise rates every year simply because they can. If you make a point to shop around for a new carrier every time your policy is up I guarantee that you will get a competitive rate that is better than your current one.
Cheaper cell phone plans. Do you really need 5000 cell phone minutes for $140? Could you do with 1000 for $40? Also there are a lot of phone plans (MetroPCS and Boost Mobile) that offer unlimited minutes for as low as $40. You just have to shop around.
Cancel memberships you don’t need or are not using. If you are not making use of your $20 per month video game subscription, cancel it. If you live in a complex that has a gym, or if you can work out at home, then you can consider cancelling your gym membership as well.
Set up a separate account and set up an automatic transfer of a fixed amount of money to that account every time you get paid. Once you have a decent amount of money in your investment account you will be well on your way to making passive residual income.