The whole basis for this site is to educate people on the principles and power of cash flow.
CASH FLOW is simply the flow of cash moving into and out of your accounts. The goal is to have more CASH FLOW coming in than going out, a lot more. Positive CASH FLOW, or more money coming in, allows you to pay expenses and debts, reinvest in your business, and provide a buffer against future financial challenges through savings and investments. Conversely, negative cash flow is when you have more money going out than you take in, leaving a negative balance in your account. Some call this living above their means, or paycheck to paycheck, in short, this is not a place where you want to be. Sadly, this is where a majority of Americans find themselves.
In business, CASH FLOW is used to assess the quality of a company’s income, that is, how liquid it is, which can indicate whether the company is positioned to remain solvent.
How Do I Get CASH FLOW?
To learn how to get cash flow, you must first understand that CASH FLOW comes from two main sources, active income and passive income. Most people are very familiar with active income, it is the money made from working at a job. You work, you get paid. What I think most people don’t realize is that the principle of “working for money” applies to both the high school kid working at McDonald’s as well as an orthodontist who spend years in graduate school. Even though an orthodontist can command a much higher wage for working, he still has to go into work to get paid. In both of these instances you are paid for your time. You trade time for money. This is the way many of us were taught. Get good grades, go to college, become a doctor, lawyer or engineer and you’re set. You are financially free. But what happens if, God forbid, you cannot work. You are no longer able to make the trade of time for money and consequently your cash flow stream dries up.
The other form of income, passive income, is less familiar to most of us because we aren’t taught about it in school or from our parents. Our financial education is lacking in this respect. Passive income comes from things like businesses, investments, and real estate. Passive does not mean that there is no work involved. Passive income is produced through front end work that then pays you without punching a time clock in the future.
Here’s a real life example:
You do some research into dividend stocks and find a few stocks that you think have great value. You purchase the stocks in your brokerage account using some money you made from selling your old baseball cards and Star Wars figures. On a quarterly basis, you receive a dividend check from the companies you’ve invested in. You did some work in the beginning researching stocks, and that work pays you on quarterly basis, quarter after quarter, year after year.
Here’s a more sexy example: using that same money from selling your action figures, you find a house in your neighborhood that is severely distressed and you think, undervalued. You buy the house and fix it up using good old fashioned sweat equity. The electrical and plumbing you hire a professional. Once it is fixed up, you put a “For Rent” sign in the yard. A nice young couple rents the house from you and sends a rent check to you every single month. In this scenario, you worked by finding the house, fixing it up, and finding a tenant. That work will pay you passively month after month.
Active Income is Working For Money.
Passive Income is Money Working for You.
Billionaires like Warren Buffett, Bill Gates, and Mark Cuban understand this principle. They have started companies, invested in companies and invested in real estate, and they each receive their incomes from multiples sources of passive income.
Cash flow from passive income is the purpose and goal of this site. Through financial education and rewiring you will learn how to become wealthy through passive income streams. In upcoming posts I will help you to recognize ways to create passive income streams for yourselves and your families.