Cash Flow–Definition

Cash Flow is another term you have heard me use several times in different posts, but it is another very important one to warrant an entry under the Financial Lingo section. For those who are regular readers…..STOP….think, to see if you know the answer before you read on.

Okay for the easy definition of Cash Flow, it is all your income minus all your expenses. Meaning what is left after everything is taken care of. When I am doing my Financial Organizing Cash Flow is a big deal, since it helps establish what is available to pay down existing debt, or creating the safety net, or emergency fund, or when you can retire early. We start with that and build all sorts of fun pay-off calculation scenarios, making 1-5-10 year plans, all sorts of things we do, once we get that vital piece of information.

If anyone is a fan of Rich Dad, Poor Dad, they are probably familiar with this term, if you have ever played Cash Flow 101, the board game you would know that the only way out of the Rat Race is to make your cash flow exceed your expenses, hence you no longer need to work for a paycheck. I love that game, if anyone ever wants to play drop me a line, I am always up for a game. Anyway, I digress; Cash Flow is a great barometer to see how you are doing and how fast you can become debt-free. The idea is to maximize your Cash Flow by increasing your income (not easy in this environment) or decreasing your expenses. I know, I know, you are saying I have cut everything, there is nothing else I can do…..ah, that is where I come in, there are many tricks of the trade that you may or may not know about, I try to share a lot of them on this blog, but I would be more than happy to evaluate your situation, free of charge.

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~ by debt2dreams on March 31, 2009.

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