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Cash Is King: Part 3 – Increase Your Net Investible Income

The Point of Saving: Increase Your Net Investible Income

It may seem unnecessarily complex to parse out a healthy philosophy of savings, but I promise, it’s this little distinction that will mean a world of difference for you.

It’s this definition that will determine whether you exercise your full capacity to create wealth and purpose and meaning in the world, or whether you fall off the road into the steep ditches on either side: on one hand medicating your lack of true fulfillment by spending it all today to make sure you at least got to enjoy life, or on the other become the miser that’s hoarding money for fear of not having enough and missing out on life’s beauty altogether.

Probably one of the most important things you could ever clarify for yourself is your motives about money.

So take a moment to understand. Hang in there until you do. I promise it will serve you for a very long time.

The point of paying yourself first is to increase your net investible income.

So, what is net investible income, and how do you increase it?

Let’s break this down.

Income is the easiest place to start. It’s the money coming in each month. To increase it, the solutions that come quickest seem to be asking for a raise, working more hours, getting a higher paid job, getting a second job, or sending our spouse back to work.

Each of these solutions relies on a core concept that income is related to a paycheck from hours we’ve spent working.

But there’s another, more efficient thing we can send to work for us than our time.

It’s our money.

When you put your money to work for you in assets that produce cash flow, the assets increase your income.

Now that we’ve explored the options to increase income, let’s talk about the net investible portion.

Imagine you have a rule that you always save 30% of your income. If your monthly income is $100, you’re saving thirty bucks. If you increase your income to $150, your rule now has you saving forty-five.

So, before you work on increasing your income, the rule to pay yourself first has to be in place first.

But, let’s face it, a savings account is NOT a cash-flowing investment. Paying yourself first into a savings account won’t give you income unless you want to count a couple pennies each month in interest.

This is where we have to connect the ideas of saving and investing together.

If you think of them separately, like hey, do I save this money OR invest it, you’ve already taken two steps down the wrong path.

Investing has two main goals: growth or income.

You’re either looking for your money to increase in value (growth), or you’re looking for it to give you cash flow (income).

For example, investing in a stock you plan to hold your whole life is a growth strategy. You’re expecting the stock to increase in value, increasing your net worth.

Buy and hold real estate investing is a cash flow strategy. You’re planning for a paycheck each month from your renters that’s greater than the monthly costs like the mortgage payment, insurance, property management fee, repairs, etc.

This distinction is key, because while increases in your net worth may look good on paper, assets that cash flow add extra income to your paycheck each month, giving you the security of tangible money that you can use.

Let’s go back to where we left off with connecting our investing to our saving.

Paying yourself first is putting a percentage of your take-home pay into cash savings that won’t decrease in value, and that you can touch, access and use.

Next, HOW you use your savings to invest in cash-flowing assets is CRITICAL.

You have 2 options:

  1. You move the money from savings to your investment. This is a redistribution of where you’re holding your money. Essentially, you’re draining out the savings tank and using that money to fill up the investing tank.
  2. You borrow AGAINST your savings, using a loan to make the investment, and allowing your cash to continue earning uninterrupted compound interest for you.

The most advantageous position you can be in is one where you have access to a gigantic pool of capital that’s growing like a war chest that you can use, AND you have assets that you know and control, that are producing net cash flow.

Here, we’ve come full circle to the idea of increasing your net investible income. Here’s what it looks like as a whole:

  1. You have an income – There’s money coming in each month that you can count on.
  2. You have a rule to save a percentage of your income to build an opportunity fund – You’ve disciplined your spending by putting money into savings first, before spending the rest. Not last, after you’ve done your spending.
  3. You use your opportunity fund to invest in cash-flowing assets – You put your capital to work for you to earn an income.
  4. You increase your total income – The income from your assets is added to your paycheck income, increasing your TOTAL INCOME.
  5. You increase your net investible income – When you stick to your savings rules at a higher level of income, you send more to savings each month, increasing the rate and volume of money going into the savings tank, and building up an opportunity fund of NET INVESTIBLE INCOME.

Here’s how it could look in real life:

  • Year 1: I take home $100,000 in Year 1 in income from my job. Since my savings rule is to pay myself first 30% of my take-home pay, my net investible income is the $30,000 I save into my opportunity fund that year.
  • Year 2: I use $28,000 of my opportunity fund for a down payment on a $140,000 property. I have an $600 monthly mortgage payment, and I rent the house for $1,000/month, cash flowing $400/month. This is $4,800/year income from my real estate. My paycheck was still $100,000 from my job, plus $4,800 from my rental property, increasing my annual income to $104,800. At a consistent 30% rule to pay myself first, my net investible income is $31,440.
  • If I continue purchasing another property with the same capital and cash flows each year, in Year 10, I will have my paycheck from my job of $100,000, and net income of $43,200 from 9 rental properties each cash flowing $400/month, increasing my total income to $143,200. Following my same 30% rule, I’ll have net investible income in that year of $42,960. (This simple example doesn’t account for your growing opportunity fund that will allow you to purchase multiple properties in a year, the opportunity to refinance to increase cash flows, ability to use equity to make additional purchases or the tax benefits of real estate.)

The two keys that made this possible were:

  1. A rule to pay myself first into an opportunity fund, regardless of how much money I make.
  2. A focus on investing for net cash flow, not just for growth.

When you have the rule in place to pay yourself first into accounts that you can use, COMBINED with using that money to invest in assets that produce cash flow, you’ve increased the amount of your income that is able to be used for more assets that increase your cash flow. In this way, you increase your income that’s available to be saved and invested again.

This is the fundamental cycle that sets you up for financial freedom. Robert Kiyosaki, the founder of the Rich Dad company, defines financial freedom by the point in time where income from your assets is greater than your expenses.

This, my friend, is the highest purpose for our money. When money is used for temporary fulfillment or as security for the future, it pacifies our fears. But when it is used to produce true freedom, we are liberated from the bondage of our fears and set free to live our highest purpose.


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Rachel empowers her clients to maximize and control their money so that they can accomplish their dreams and live out their highest purpose. She believes that if you understand the short and long-term impacts of the financial choices you make, you’re better suited to make choices that put you in control of your resources. She helps you discover money flowing out of your control, strategize ways to have more money flowing into your control so that the end result is that you have more money to retain and utilize during your lifetime, and more to pass on to future generations.


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