How you’ve been taught to measure your wealth may not be terribly effective, and it can set you up for disappointment down the road. Ask yourself: How do I measure wealth?
If you are like most people (before they’ve had their eyes opened), you probably measure it by the type of car, size of house, or dollar figure in a retirement account. You probably calculate and track “Net Worth” simply because that’s what you’ve been taught to do by typical financial advisors, TV commercials, or your 401(k) provider. However, we’re measuring the wrong thing. And we’re taught to do that!
Calculating wealth by measuring net worth diverts our attention from one of the most important wealth building variables. A sole focus on net worth will only set us up for confusion, disappointment, anxiety, and frustration in a major way.
I believe that Wealth is best measured in TIME! Now, the question is, what buys us time? The simple answer is – Cash flow.
If you only focus on net worth and pumping money into your 401(k), what happens when your job changes? What happens when a medical expense pops up? What happens when life throws you a curveball?
If you don’t have cash flow to handle it…you only have so much time until you exhaust your net worth. Guess who is positioned to offer you credit so that your cash flow gets diverted to them? Banks!
Guess who encourages you to focus only on net worth and shove your money into your 401(k) so they can manage it for years and create cash flow for themselves by charging you a fee every year for doing so? Wall Street!
If we work for a living, we simply trade our TIME for CASH FLOW. Then we are taught to stuff that cash flow into retirement accounts and let it sit, hopefully building our NET WORTH (as long as those accounts don’t lose significant value). We’re taught to pay down the mortgage on our primary residence because that will increase our net worth. We’re taught that at some point in the future, when we stop working (and that earned cash flow stops), that our plan will be to pull from our net worth to create cash flow to give us time in retirement.
But the question is, “How much time will your net worth give you?” It’s an important question, and what’s scary is that, all too often, the typical financial advisor doesn’t even consider it.
Notice, in the story above, that we work for cash flow. We stuff that cash flow away in accounts we can’t touch, then years later attempt to turn our net worth into cash flow. Yet, we were never taught to focus on or learn how to create cash flow along the way. The reason for this is that Wall Street and the banks don’t make money if you shift your focus away from building net worth their way.
You can change the story for yourself. Focus and Measure cash flow. You can increase it and position your assets to create it at this moment.
When you have cash flow coming in that is independent from your earned income and is created by assets you own and control, you buy yourself time. It is that time that creates true wealth.
To learn more, check out our most recent Cash Flow Wealth Summit. Talk to one of us here at Paradigm Life. We specialize in strategies that focus on cash flow and on breaking the cycle described above. You owe it to your family to learn about this now, to avoid disappointment in the future.