Cashflow is King. Not Cash.
You’ve heard the saying, “Cash is King.”
I want you to consider that “Cashflow is King.”
First, let me acknowledge cash. The term cash is king, obviously is still incredibly important. You want to have cash. You want to be able to do deals, and purchase them with cash if you so choose. You want to have the security, and the options to make deals or do things at any time. But case in of itself, is just the future possibility of spending or investing your money at a later time.
The problem with cash, is it gets easily spent over time. Take for example, the startups that raise millions of dollars, yet have cash flow. Sure they have a boat load of cash, and the possibility of making money in the future, but they aren’t making any money and are in many ways worthless. They won’t be worth much in the future, unless they acutally have cashflow. And yes, these companies could be acquired, for billions of dollars, without ever being cashflow positive, but some day, eventaully they must be cashflow positive, or else they will go out of business and are in fact worth noting.
With only cash, you can go out of business. But with positive cashflow, you can stay in business, and you really got something.
In most cases, it is much better to have positive cashflow than just cash itself. I’ve known so many people who have lots of assets, only to spend them away because they constantly burned at a negative cashflow. If you’re negative every month, you will eventually run out of money, it’s just a matter of time.
There are generally 2 ways to become financially indepedent.
The first commonly accepted idea, is to have enough liquid assets, that you won’t spend in your life time. Basically just having enough cash to survive, and hope you don’t burn out by spending too much to quickly.
The second, and the much better idea, is to have more passive income than your expenses, in other words, to have enough positive cashflow, that you could sustain indefinitely.
Key term here, I’m not saying more pay check than expenses, I’m talking about cash flow from businesses, and passive investments that are actually helping you have time freedom, and be financially free. Cashflow is King, it’s a very specific kind of income, that can set you free.
You should always have cash on hand, for reserves, and to take advantage of opporunites when the time is right. And you want to build up your cashflow, because you need that on-going, consistent, passive income that will set you up to be financially free, without worrying about running out of cash.