Google Search for Cash+Flow

I have received many Google search inquires lately about Cash+Flow and sometimes the Google search is What+Is+Cash+Flow. A good working definition of cash flow is a stream of revenues (income) from investments. I focus on cash flow vs net worth for a very important reason. As an investment advisor for over 15 years I saw thousands of portfolios. Many people were justifiably proud of their financial achievements-many had portfolios that were worth many millions of dollars-on paper. There are many examples of those who were millionaires including employees from United Airlines, Qwest, Enron, Worldcom etc..But closer inspection of their portfolios disclosed a glaring flaw and a certain recipe for failure-their portfolios generated no dividends or interest. No stream of revenue or cash flow. All of us love to have a high powered growth stock in our portfolio, Google comes to mind. When we are out with friends or associates we can brag that we own Google, even if it’s only one share-we all love to brag about our investing prowess, don’t we? Here is one investment truth that will not let you down-cash flow does not lie. A growth stock may tank but if you build a portfolio that is throwing off $10,000 a month in cash flow-it will not disappear in a New York minute. Your growth stock may, so may your Net Worth! Long live Cash Flow!

3 Responses to “Google Search for Cash+Flow”

  1. Rajen Devadason says:

    Dear Steve,

    While I haven’t been in the business as long as you have, I too have come to the same conclusion: That cashflow provides tremendously more protection than mere net worth.

    Not only have I seen this truth in the lives of my financial planning and life planning clients, but also in my own.

    During periods of extreme cashflow constriction, I’ve felt as though the oxygen around me was being depleted. There have been times when I’ve literally felt myself gasping for air as my fears concerning dwindling cashflow caused all kinds of psychosomatic symptoms to manifest themselves.

    Each time, as ways were found to replenish cash and rejuvenate cash streams into my life, the breathing became easier.

    Keep up the great work.

    Warmest regards,

    Rajen

  2. Seattle Simplicity says:

    Steve – your blog has created in me an ‘aha’ moment. You’re right – PF bloggers are intensely focused on net worth, whereas cashflow is a different, yet better gauge of financial health. I began to develop a cash flow statement for my personal finances. It reveals that although I am cash flow positive, 94% of my income is derived from my day job. I am completely dependent on gainful employment from my corporation. That’s kind of scary…

  3. Steve Mertz says:

    Hi Seattle-Thanks for your your thoughts. I realize that we all need to “work” for various fullfilment reasons but sometimes we loose focus that one of the goals should be to replace our job income with passive cash flow. I enjoy your blog-great job 🙂

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