What is Cash Flow and Why it’s Like Oxygen
What is Cash Flow?
Cash Flow is the movement of cash from an investment, business or any other activity that produces cash. Positive cash flow is good and negative is bad.
Why Cash Flow is like Oxygen?
The moment we run out of oxygen, we are done with our lives. Cash Flow is the same for businesses and investors. The moment you run out of cash flow you are out of the investment or business.
Tip: Put money aside for savings first not last.
Why is the Topic of Cash Flow Important?
What did you want to become when you were little? I wanted to become a pilot. Did you follow the traditional “Go to school and get a good job” path? I know, I did. This path is about becoming an employee for life. You are stuck at a 9 to 5 job, in most cases. You become like a robot programmed to work, take a break then go back to work again. This becomes a routine and you cannot get out of it unless, you make a conscious effort.
- Cash flow is the key for getting out of the rat race or your 9 to 5 life.
- Cash flow can provide growth in investment or business.
- Cash flow can also provide flexibility in decision-making and allows you to take quick actions.
“Business and investing are not risky, but being under-educated is” – Robert Kiyosaki.
Bad cash flow management could lead to:
- Over dependency on a job. A person with bad cash flow cannot afford to quit their job.
- Loan defaults, foreclosures or even bankruptcy and financial stress.
- Extra expenses. It Can turn a good investment into a bad investment; positive cash flow may become negative.
- Stress on family life and relationship.
- Seeking for constant pay rise.
Is a Pay Rise a Good Solution?
If you don’t have enough money today it either means you don’t know how to manage your money or you don’t get rewarded for your skills, creativity and problem solving ability. So is a pay rise going to help? In the short-term, yes. What about the long-term? If a person does not know how to manage money and gets a pay rise. What do you think is going to happen next? What about that new car or the new mobile phone you always wanted? May be even a new laptop or a ring.
“People who cannot control their cash flow work for those who can” – Robert Kiyosaki.
Can you Afford to Quit your Job?
Some people earn a lot but are unhappy with their work. What is the solution? Is it to find another job? Certainly not, it’s like starting the wheel of fortune again. Some people have very high expenses that tie them down to their job. Start by managing your cash flow better, then start saving and investing to get out of this situation.
Tip: How much do you save? The answer should be a percentage of your earnings. Read Escape Your 9 to 5 Life for more tips on saving and investing.
Recommended Next Steps:
- Dedicate 5 hours a week or 1 hour per work day to read or educate yourself.
- Start reading books on Financial Freedom, Cash Flow, Passive Income
- Browse a few websites on the above topics
- Play Cash Flow 101. Now that sounds like fun. You bet! – This is my favourite. Check out the Resources page for links.
- Read books and websites on property investing and starting a business (online or offline)
If you like it, share it. Comments welcome.