To be clear it's already August so if you haven't started to take a look at your finances we implore you to do so NOW! Since we've got that out of the way, let's take a look at a potentially contentious issue given the rise of technology and the reduction of the use of cash
3 reasons why cash and cashflow are KING
- You can't pay for groceries using equity or assets
While it is great to have assets i.e. shares, P2P lending (arguably), investment properties they generally won't be accepting these at the local shopping centre anytime soon. Saying that purely cash flow is KING is somewhat misleading as you do require the asset before you end up having the cash flow. Having said that though the concept of losing money on an investing with the hope of seeing future equity gains is potentially a game fraught with danger and heart ache
- It forces you to appreciate how much you are spending
If you are tapping your debit or credit card you are usually not getting a full appreciation of how much money you are spending right? Imagine if you had to feel every $$ you spent, would this make you consider how much money was "slipping" through your hands? I'd say likely it would
- It will likely give you financially peace of mind
We say likely here as there are very few guarantees in life, especially as we know that life is about constant change. Imagine if you had 1k coming in a month without you putting too much effort in? Times that amount by 10 and consider having 10k coming in per month. How does that change your mindset towards your finances, life etc. We'll leave you with that thought!
Now that you know why cashflow is king how do you hold onto wealth? While there's 3 quick tips below, chat to your finance specialist and someone you trust before implementing any strategy
- Have a cash-flow buffer or emergency fund - Doing this will mean that when things invariably don't go according to plan you'll have money there to hold onto assets that you own
- Be open to different asset classes - While some extraordinary investors such as your Warren Buffets appear to be able to hold all of their wealth and continue to increase it by investing in one asset class these are exceptions rather than the general rule
- Understand and always keep learning - While there is no guaranteed hedge against losing your assets, wealth or anything for that matter, learning through books, seminars etc may be a way to do this
What are your thoughts on cashflow being king and what are ways you can suggest to hold on to your wealth?
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