“It is easier to invest for cash flow during a financial crisis. So don’t waste a good crisis by hiding your head in the sand. The longer the crisis lasts, the richer some people will become.” — Robert Kiyosaki
I’ve got a question for you.
Would you rather have a high net worth or have substantial cash flow coming in every year?
I’ve had over 1,500 one-on-one phone calls with investors, mostly high net worth millionaires.
You’d be surprised how often this question comes up!
Is cash flow more important?
Is appreciation more important?
I have a pretty strong opinion about this.
It may not be what everybody believes, but I wanna share my thoughts with you today.
Let’s get into it!
1. Let’s Compare
What would you do if you had the choice between a net worth of $100 million or a cash flow of $3 million a year?
Which would you rather have?
When you have high net worth, you have the ability to own all sorts of luxuries.
I have friends with planes and jets and it works very well for them!
They have a lot of flexibility in their lives.
But what happens when you have a high net worth without any cash flow?
You’re living off your assets and see that value diminish over time.
This scenario, of course, assumes that you are conservative in your investments and you don’t have the skills to invest to develop cash flow.
We see this when people win the lottery.
In August 2022, the Powerball jackpot was $206.9 million.
Most people who win the lottery actually opt to take a lump sum payment when they win.
When they do that, they don’t get the full $206.9 million.
But if you took a lump sum in one payment, they pay less – only $122.3M
They would get taxed almost $50-$60 million, making their total earnings $60-70 million.
That’s not bad!
But it’s also not the full amount.
That $60 million lump sum payment can be seen as a person’s high net worth.
The money could be in a bank not doing much on its own.
However, the winner also has the option to annualize their payout.
If the August 2022 winner did this, they would have received the full $206 million over 29 years.
This steady income is equivalent to a high cash flow.
Which option would you choose?
Let us know in the comments!
Now that we’ve looked at the differences between high net worth and high cash flow, let’s look more closely at cash flow.
Cash flow is nice because it consistently pays for your lifestyle.
I know someone who makes over $1 million a year in cash flow thanks to their investments.
It’s awesome because they can live however they want.
Money accumulates and they keep investing more.
The idea is that your money goes out and comes back with many more friends.
You work, but your money is also working for you.
If you’re a high earner, a good question to ask is:
Are you doing the time for money trade?
I worked with a couple of physicians who made over $3 million a year each.
But they were also working 60 to 80 hours a week.
They couldn’t get paid if they didn’t go to work.
If you are making a lot of money, you should think about how to develop cash flow streams so your money is making money.
With high cash flow, you live well but you may not feel rich.
You can’t buy everything you want, but your expenses are covered.
It all comes down to preference.
2. Give Me Cash Flow
For me, I would much rather have cash flow than a high net worth.
Going back to the lottery example, I want the 29 payouts.
I’ll find a way to reduce taxes and live off the winnings with an annuity stream.
Cash flow allows me to live the lifestyle I want and also reinvest so the money can grow.
Tim Ferriss talks about the concept of the “old rich” in his book The 4-Hour Work Week.
“Old rich” is synonymous with gaudy things. Owning mansions, jets, and expensive jewelry.
The opposite, “new rich” is more modest where you only have certain experiences.
With cash flow, you’re able to do all of those things right now!
How do you grow your cash flow?
The first thing we talk about here at Bronson Equity is your rat race number.
The board game Cashflow 101 covers this.
You have an occupation in the game and that occupation corresponds with a rat race number.
To win the game, you need to get your cash flow to cover that number.
When I first wanted to quit my job, I had to find a way to earn $60,000 per year to cover my modest lifestyle with some travel expenses.
Eventually, I was able to cover that number and get out of the rat race.
I got to choose if I wanted to work or not on my own terms.
This is why learning how to grow cash flow is so important.
Many times, someone who inherits a large amount of money doesn’t know how to handle that financial responsibility.
They don’t know what good cash flow looks like.
Their net worth is a finite amount.
At our investment club, we do different things to develop more cash flow
We invest multifamily deals, car washes, ATMs, as well as oil and gas.
Now the question becomes how you develop more cash flow.
3. How to Get More Cash Flow
I had a revelation when I was working in medical sales.
I made $200,000 a year.
I worked 30 hours a week.
Eventually, I realized I was in a time for money trade.
I wanted out and I knew I could get there if I grew my passive income.
Even if I was only growing passive income by $5,000 to $10,000 per year, that was awesome progress!
The first step to getting more cash flow is finding great deals.
Go to networking events and conferences.
Talk with other passive investors.
Ask them what deals are working and not working.
We’ve gotten some unique deals by just word-of-mouth.
You should also learn from other investors’ experiences and show a preference in your deals.
If you can have cash flow, that will be a huge benefit.
That’s one thing I love about our ATM deal: it’s the most consistent cash flowing deal I’ve seen.
It pays out every single month like clockwork on a preferred return.
In conclusion, I think passive income is way better than having lots of money in the bank.
Obviously, if you have lots of money in the bank, you can do whatever you like!
But for me, it’s very different knowing that you have the intellectual capital to create more wealth.
To achieve financial freedom, you need to learn how to make more money with your money.
Once when I was at an event, I heard Robert Kiyosaki say that being wealthy is not what you have versus what you don’t have.
Being wealthy is being able to regrow your wealth after losing everything.
True wealth comes from your connections, your relationships, and your own intellectual capital.
I hope you’re able to create lots of cash flow for yourself.
Now I want to hear from you!
What steps are you going to take to create cash flow?
Let us know in the comments.
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.