Your financial “health check”

In order to understand how healthy your finances are, you need to know your cash inflows (income) and cash outflows (expense). To start, let's evaluate your income.

SOURCES OF INCOME

Think of the money you earn, or income, as one side of a scale. Income includes any of the following:

As listed above, your income can come from many different sources and in a variety of forms. Excluding sources of money that are not related to personal capacity and are also irregular (e.g prizes, inheritance), basically, there are two ways to generate income. These are based on the Cashflow Quadrant model of the Japanese- American billionaire Robert Kiyosak.

ACTIVE INCOME

You directly use your own resources (knowledge, skills, time, health) to make money, by contributing to and creating a certain value for others (the owner of the company you work for) or for yourself (your own business and the revenue of this job is associated with your presence and hard work, such as opening a home-cooked restaurant and selling through online channels, etc.)

PASSIVE INCOME

There is no exchange of labor and time but you still generate income for yourself. There are two ways to generate passive income.

Let the system work for you (open your own company, employ a representative to run and manage the business): The system still operates and makes a profit without your presence and involvement.

Money makes money: Also known as investment, this form can be a term deposit at a bank (the interest is an additional income besides the original principal because if we leave money in our house or in our bank account, we will never have this surplus,) the purchase of real estate (house, land), stocks, etc.

DETERMINING SOURCES OF INCOME

If you don’t have a job, your income may not be very steady right now. Even if you’re employed, your paycheck may vary if your working hours change each week. That makes predicting your income harder, but not impossible.

Mai’s and Tuan’s incomes during the year are listed in the following chart.

As you can see, Tuan regularly makes about VND 20,000,000/month (including salary and bonus) and receives an additional allowance of about VND 5,000,000/month (VND 1,200,000/week). Mai, meanwhile, has an income of about VND 7,000,000/month from her seasonal work and receives about VND 6,000,000/year from gifts.

Just like Tuan and Mai, fill out the list below to check your cash flow!

PRINCIPLES OF INCOME GENERATION

1. EARLY START: It's never too early to start making money

You need to know the balance between making money and other goals and joys in life, though. Tuan and Mai have had experiences in earning and spending since they were in school. Getting started early helps them get more social experience and respect the value of money. However, Tuan and Mai still do not have specific financial goals, so they mainly make money to serve their personal spending and shopping needs.

2. DIVERSIFICATION: Having more than one source of income

3. PRIORITIZATION of sources of income with sustainable growth

Tuan and Mai have both chosen part-time jobs to have more than one source of income, and both have determined that the goal of the part-time job is to help them become more professional. The side jobs are still related to their primary jobs, so they can take advantage of their capabilities, experience, and relationships. Being an expert helps to generate income with sustainable growth.

4. GROWTH of at least 20% of income per year

Diversifying helps increase the number of sources of income for Tuan and Mai, but the two also identify it as a growing source of income. In addition to qualification improvement, Tuan and Mai determine that there must be a step forward in income. A minimum of 20% per year will motivate them to increase their productivity at work without applying for more jobs. As a result, their paycheck amount will be higher.

5. VALUE CREATION: Your income will be higher when you create true value

One factor that helped Tuan get a higher position in his company is that he constantly creates value for his business. The value Tuan creates for the business is always many times higher than what the business pays him. To retain an excellent employee like Tuan, the company constantly evaluates his performance and raises his income based on the actual value he has brought to the company. Hard work, confidence, and self-worth improvement are prerequisites to achieve the goal of income growth.

6. PATIENCE: You won’t become a billionaire overnight. Be patient, persistent, and proactive

Tuan did not get an income of VND 25 million right after he graduated from university. Tuan’s starting salary was only equal to the regional minimum. Working as a sales manager for a real estate company like Tuan is of inherently high pressure. To achieve this salary, he has worked non-stop for four years. Despite facing many difficult periods, he has never given up.