The first and most important step in achieving financial peace is having a healthy cash flow. To over simplify things, I’d like to begin with this statement: “The inflow of cash should always be greater than its outflow.” Cash after all, is the life blood of our personal finance lives.
Cash is the life blood in personal finance. The movement of cash determines the quality of your personal finance life. Cash flow is all about how much you earn and how much you spend and the key to optimizing your financial future lies in how we manage our cash.
One can’t really do anything financially unless he has achieved a positive cash flow. In personal or corporate finance, a cash flow determines the viability of an individual or a corporation. Many big corporations failed because of poor cash flow management and the same thing can be said of individuals.
What is cash flow? Accountants will probably have a more detailed and complicated definition of what cash flow is – to them, it will cover inflow of money from revenues, sales of assets and any other forms of money coming in and matching it with outflows for expenses, investments, taxes and the like. Finance is primarily concerned in the management of cash flow to ensure solvency and the survivability of any corporate organization. To simplify for personal finance sake, cash flow in this case is all about inflows and outflows or income and spending.
My simple formula to achieving and admirable cash flow is to earn more income, spend less money. If you can manage to do both at the same time, you will super charge your financial life. But again, these are the things that are easier said than done right?