I’m going to share with you a secret. This secret is going to help you live a more financial stable life. If you understand this secret, you’ll can utilize in a way that can make you financially free. I’ll show you how you can be financially stable.
I was first was exposed to this secret of cash flow through the famous Robert Kiyosaki several years ago. At first, I had no idea what cash flow was, it sounded like a business terminology that could only be grasped by MBA students.
Anyway, after Robert Kiyosaki released has PC game “Cash flow 101”, after many games, I finally understood the power of cash flow and I’ll now share it with you in this post.
As you can see, I’m very passionate in this topic and I really want you to understand why learning cash flow is important.
I’m going to explain this concept in the most easiest way I can.
So here we go.
Let’s say you earn $1,000 per week.
In the first week, if you take away all your spendings such as bills, petrol, luxuries, beer etc and your left over with $87, what’s your cash flow for the week?
That’s right, it’s only $87.
In the second week, if you do the same thing but now you are left over with $22.50, then what’s your cash flow for the week?
That’s right, it’s only $22.50.
In the third week, if you do the same thing is deduct all your spendings and you are left with $800, what’s your cash flow?
That’s right, it’s $800.
Okay, so now you understand what cash flow is, it’s simply what’s left over after all your spendings.
Pretty easy isn’t it?
Now this is where you can either become rich or poor.
So here’s the question, what do you do with your cash flow at the end of the week?
You have only two options, you either spend it, or save it.
Do you spend it? Or do you save it?
Scenario 1: Spend it.
Let’s say that you spend you cash flow at the end of the week so you’ve got nothing left over.
What’s the result? You’re broke.
Any extra bills, extra expenses, your grandma calls and asks a favor or a friend, you have no money to give.
The result: You’re financially unstable. You’re broke and miserable until you get your next pay.
Scenario 2: Save it and spend it all.
Let’s say you SAVE your cash flow at the end of the week for 4 weeks.
What happens at the end of 4 weeks? You have some money saved.
However, a big event comes along and you want to spend your 4 weeks of cash flow savings, so you do.
You spend your 4 weeks of savings and now you’re back to zero in savings, as a result, you’re financially unstable.
Your broke and miserable until you get your next pay. You may even more miserable because you’ve spent your 4 weeks of savings and have to start over again.
Scenario 3: Budget
Let’s say you have 4 weeks of cash flow but what you’ve done is you’ve saved 50% of your extra cash flow and the other 50% is allocated to spending.
So now you have two buckets, one is saving, one is spending. Every week, you set aside half of your cash flow into a savings bucket and the other half into a spending bucket.
You’ve split your weekly cash flow in half so they are in the savings bucket and spendings bucket.
No matter what happens, you are saving a little and spending a little. But you NEVER touch your savings.
The savings bucket acts a a financial fortress.
The spendings bucket acts as a “unexpected spendings”. You can spend this if you want.
Fast forward 1 year, you’ve got a huge amount in your savings bucket and you may have some money in your spending. Which is fine.
The result, you are financially stable. No matter what happens, you are protected unless you take a risk and spend all your savings.
Imagine the feeling of knowing you have $50,000 in your bank account and any bills that come your way, unexpected expenses such as funeral costs, medical bills etc will cover it without putting you in debt. This is a great feeling to have.
You sleep better at night.
How to be financially stable
I hope I’ve explained to you the importance of cash flow clearly, this secret has made people financially stable for years.
So let’s play the what if game.
What if you saved for 1 month? How much cash flow savings would you have?
What if you saved for 3 months? How much cash flow savings would you have?
What if you saved for 1 year? How much cash flow savings would you have?
What about 10 years? Hmm.
The concept is extremely simple but the only ingredient left to make it work is this:
Most people are not disciplined enough to stick to the plan for years.
Most people spend all their cash when they get it and have nothing left over to save.
Most people hear about cash flow but don’t do anything.
The question is, what will you do?
Decide today what will you do with your cash flow for the rest of your life.
Good luck and manage your cash flow!