I've read several books that recommend making purchases that increase your cash flow. Most point to real estate as the way to go, however this requires a big commitment and some working capital.

Is there a smaller type of purchase or investment that requires less knowledge and cash upfront that can be a good stepping stone into something larger later on?

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    Do you have any debt? Reducing your debt can free up cash flow that might have been tied up to service the debt. – Chris W. Rea Apr 27 '15 at 19:46
  • @ChrisW.Rea that's a good point. – Sandy Apr 27 '15 at 19:55

You can increase your monthly cash flow in two ways:

  1. Increase income
  2. Decrease expenses

It's really that simple. I'd even argue that to a certain extent, decreasing expenses can be more cash-positive than increasing income by the same amount if you're spending post-tax money because increasing income generally increases your taxes.

So if you have a chunk of cash and you want to increase your cash flow, you could decrease debt (like Chris suggested) and it would have the same effect on your monthly cash flow.

Or you could invest in something that pays a dividend or pays interest. There are many options other than real estate, including dividend-paying stocks or funds, CDs, bonds, etc.

To get started you could open an account with any of the major brokerage firms and get suggestions from their financial professionals, usually for free. They'll help you look at the risk/reward aspects of various investments.

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  • Or if there's a family of mutual funds you are satisfied with, it's possible to open an account directly with that firm and not pay the broker's fees. I have such a "house" account, and while they remind me on every statement that I should have my investment firm contact them it works perfectly well without that middleman. And there are advantages to having my financial advisor completely independent of the actual transactions; it may mean I have to pay for that service (currently my employer is doing so), but it also means hey can't be tempted by commissions to steer me into bad decisions. – keshlam May 20 '15 at 18:44

Brownbag your lunch and make coffee at home.

If your current lifestyle includes daily takeout lunches and/or barista-made drinks, a rough estimate is you have a negative cash flow of $8-20 per day, $40-100 per week, $2080-5200 per year.

If you have daily smoothies, buy a blender. If you have daily lattes buy an espresso maker. I recently got myself a sodastream and it's been worth it.

Until you have a six figure portfolio, you aren't going to swing a comparable annual return differential based on asset allocation.

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Mutual funds can be relatively low risk and a good starting point. Really it depends on you.

What are your goals?

This is a pretty open ended question.

  • Mutual Funds
  • Bonds

These can all be low risk and provide some return.

Note "Less Knowledge" is never a good qualifier for an investment. Your money is your business and you are entitled to know what your business is up to.

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  • I wouldn't consider investments in retirement accounts to "increase cash flow", since you can't make use of the cash without stiff early-withdrawal penalties. Likewise, mutual funds would increase cash flow only to the extent that they provide ongoing yields; many stock mutual funds focus on appreciation and provide minimal cash flow. In addition, "retirement" is not an asset or a kind of purchase; a retirement account is just a place where you hold assets. – BrenBarn Apr 27 '15 at 19:26
  • @BrenBarn I missed the "increase cash flow" So yes, I agree the retirement fund would be a bad choice. I will edit to remove that. You are wrong however about mutual funds being a bad choice. There are income geared mutual funds. Take VDIGX for example – Anthony Russell Apr 27 '15 at 19:31
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    @AnthonyRussell Thanks for your answer. With "less knowledge" I mean something like investing in a CD vs in the stock market. One I can do today while I'm still learning the ropes on stock market investments. – Sandy Apr 27 '15 at 19:56
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    Cd vs. Money Market vs. Bond vs. Stock depends on your time horizon and risk tolerance. To get higher returns, you must accept higher risks of actually losing money. The same applies to real estate, though that's more a matter of running a small business, with its own kinds of risks and trade-offs. – keshlam Apr 27 '15 at 20:48

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