What’s the big deal with cash flow and why does it matter so
Cash flow is the amount of cash flowing in from income and out from
expenses each month. It goes a step beyond budgeting in the financial world.
When more money is flowing in than out, it’s called positive
cash flow. And when more money is flowing out than in, it’s called negative
cash flow. Bedsides feeling great,
positive cash flow gives you the funds to grow and expand both your lifestyle
and your savings account. And that’s a
This means that the foundation of accumulating money goes back
to creating positive cash flow.
The term cash flow is usually associated with cash for running a
business, but it’s equally important for individuals in achieving and
maintaining financial health.
We all know that icky feeling when there’s more month than money,
right? It just feels great when you have more money than month. So, in addition
to helping you build up your savings account, positive cash flow lays the
foundation for feeling good about your money. When you feel good about your progress,
you’re more likely to see and take opportunities to make it even better.
Now let’s relate cash flow to reaching your personal financial
goals from a practical standpoint. Achieving goals from positive cash flow can happen
in 3 different ways:
Investing your money to grow and
compound for your long term goals
Cover current living expenses and fund
short term goals
Increase cash flow even more with
investments that produce income that can be used to achieve short term or
longer term life goals
These uses of positive cash flow are possibilities for what you
can do with that “extra” money for both short and long term goals that you’ve
defined as important in your life. As
you can see, making cash flow consistently positive is crucial to reaching
goals and also living the way that you want to live. And the keys to accomplish
this are tracking your money, spending consciously and increasing income.