Most of us are not aware of the cash flow pattern around us. Like a worker who takes his usual way to work, he can drive and talk on the phone (if he does not get caught) and buy something on the road, all at the same time. The reason he can pull this stunt is that his mind is not on the ride to work. He has done it so many times, he can drive to work with his eyes closed if there are no other cars on the road we will do it. The point is, he is not thinking. He is operating on autopilot, virtually brain-dead.
That is the same way we tend to handle money. We keep doing what we did yesterday, the day before, last month, and last year. We hardly take notice of the cash flow pattern around us, so see whether we are setting up the game to win or to lose.
Money is a game. The pieces are always on the move. Money is always on the move. It is either coming in, working, or moving out. Even when you save, it is not stationary. The bank is putting it to use.
It is very important to know which direction your cash is moving. If you want to invest, look at the cash flow pattern. You want to put yourself in a position whereby the cash is flowing toward you. When you spend, does money flow back toward you?
One way to troubleshoot your cash flow pattern is to mentally shut off your primary source of income. If that source of income goes offline, are there other sources of income to support you? A lot of people want to buy a plot of land, and maybe build a house. That is a noble dream. If you buy a plot of land and leave it to lie fallow, what is the cash flow pattern?
If you must buy land, why not buy one which can be put to other uses while you get ready to develop? With a keen eye on cash flow, you can generate income from the land instead of leaving it to lie fallow.
What things are lying fallow in your house? What liabilities can you turn into assets? If you have excess freezer space in your kitchen and always have someone at home, why not sell ice blocks for example? What other use can you put your car to rather than drive it to work, leave it idle from 7.30 am to 4.30 pm, and then drive it home? What about the spare car in your garage? In what ways can you use what you already have to generate cash flow? In what ways can you generate cash flow from your home?
If you bought land to appreciate, you need cash flow to sustain you while you wait. If you need to take a mortgage loan to buy an investment property, for example, you need a corresponding cash flow to support your application. If all you have is your salary, then you are limited to the amount you can borrow, no matter how fantastic the investment opportunity is. When it comes to investing in real estate, you cannot rely on only your money. How long will it take you to save N200 million to buy a property? By the time you finish saving, you would have grown white hair and the asking price for that property would be in Billions.
You need cash flow to support whatever investment you want to go into. That is why it is crucial to focus first on cash flow rather than capital gain or appreciation. If you know what you are doing and play your game well, you can gain both cash flow and appreciation. Cash flow is king. As the saying goes, he who has the gold makes the rules. For every step you take, every move you make, keep an eye on the cash flow.
Image: kahlerfinancial.com
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