Robert Kiyosaki, author of Rich Dad, Poor Dad and advocate of the cash flow concept states, “The primary cause of financial struggle is simply not knowing the difference between an asset and a liability.” (Rich Dad, Poor Dad p. 61)
Upon reading that, did your eyebrows raise? In a world that is chalk full with most things being purchased on credit, you’d think people know the difference between an asset and a liability – true, right? False.
For instance, home ownership is not an asset, at least according to Rich Dad, Poor Dad. If whatever you’re financially obligated to does not put money into your pocket, then consider your assets to really be liabilities.
How do you move your financial situation from owning liabilities to owning assets?
Increase your Cash Flow.
President Nixon, in 1971, moved our currency completely away from the gold standard. When that happened, it gave the Federal Reserve even more control of how the dollar valued.
From that point on, the dollar’s value consistently went down, while inflation went up. That’s why your cash is more valuable today than it will be tomorrow. When it comes to increasing your cash flow, it’s imperative to know how the dollar stands in the economy, or else you’ll find yourself spinning your own wheels as your try to generate more money.
How do you increase your cash flow?
Your cash can be increased in number of ways, but besides trading your time for more money, you can first start with purchasing assets that satisfy an opportunity cost.
Since we do work with a fiat currency, interest now speaks louder than the actual dollars that you have in your possession. If you use interest to your advantage, then increasing your actual cash can happen quickly.
If you already have cash, how are you at managing it? Here are a few questions that can help you determine how diligent you are with your money:
What is my cash balance right now?
What do I expect my cash balance to be six months from now?
Is my outflow of cash greater than my incoming cash?
Can you successfully separate your profit from your cash flow?
Though our economy operates on cash and interest, the opportunity given to each of us is that we have a choice with where to put our energy and time to earn a living. There is no specific way to build your financial legacy. The best approach to cash flow is education. Learn about the right places to invest your money to maximize your financial freedom.
Join the Cash Flow Wealth Summit today to learn about lasting financial principles.