The Most Powerful Investment You Can Ever Have Is Positive Cash Flow
Guest Post by John Jamieson of WealthWithoutStocks.com
Throughout most of our lives, we are trying to accumulate assets by using our cash flow. We hope these assets will help us in later years provide... cash flow! Cash flow is what gives us more options and security than even a hard asset. Expenses come every month (and some every week) and we need income to be able to pay all our basic bills and give us a certain standard of living.
Cash flow is the most important asset but this is especially true during our first 10 to 20 years of starting our careers. When you’re 25 years old and assuming no big inheritance by then and parents who tell you to get lost and make something happen on your own, the only thing that matters is cash flow. When your cash flow stops or takes a big hit your entire life can go into free fall.
If you’re smart you have some positive discretionary income that you are converting to hard assets. The first hard asset you should have is a good old-fashioned savings account. Never mind that it earns you almost no interest because not everything you do should be about “investing” but should be about handling short-term cash flow needs first. This is a simple rainy day account not to be touched and kept on hand for true emergencies. (Going to Cancun is not an emergency I’m sorry to say)
Once you have that rainy day account (90 days of your base bills should be a great start) then you can put additional funds in your savings account (maybe even consider opening up a separate account) to save for the Cancun trips, car, Motorcycle, big household items, etc. This is how you go from a pure cash flow creature to cash flow and asset creating creature.
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Should We Invest in Our 401k and/or IRA?
I wouldn’t advise that and I know in the traditional financial world this is considered crazy and even heretical but the traditional financial world is not out for your well being, it is out for their well being.
The basic personal finance model we all have been taught is totally in favor of banks and Wall Street while ignoring your most important asset of cash flow! Here are the basics of what we are all taught to be a financial success.
- Invest 10% of our income into our 401k or IRA
- Borrow money to buy all your big ticket items from the bank and make payments for the rest of time. You’re told this is fine because of “low-interest rates”
Here are some statistics to chew on for a minute. The 10% you are supposed to put away is nowhere near being met by most of the country. The national savings rate is about 2.5% while at the same time we as Americans and on average pay out 40% of our income to banks. Who's getting rich off of that business model?
John Jamieson is the author of two bestselling books with the latest entitled “Wealth Without Stocks or Mutual Funds”. He is a sought after national speaker on wealth creation and preservation and has spoken to thousands of people in every major city in North America. John is the author of dozens of articles on finance, business, and real estate. You can find him at http://www.wealthwithoutstocksormutualfunds.com/