Cash Flow – is it vanity, sanity, or reality?
Before we go there, I’d like to ask you a question…
Where is your money focus?
This is a serious question because your focus could be creating money hell or wealth heaven.
So we had better direct our energy to the things that expand what we want.
Back to cash flow…
… there’s a great saying that goes:
“Revenue is vanity. Profit is sanity. Cash flow is reality.”
That’s exactly what this video is all about. Watch it now.
Our education system, media, and the “vanity” feeding systems keep us fixated on the inflow – the income, the revenue, the top line.
In online businesses we call it “marketer math”. You hear this the whole time…“I’ve got a six figure or a seven figure business” implying that they are successful. The joke is this revenue number is absolutely irrelevant. It’s easy to have a 6 figure business if you spend six and a half figures to bring in that revenue!
Revenue is (almost) a useless number. It’s one of the numbers you want to know when you’re looking at your financial statements but it’s DEFINITELY NOT the most important number.
The most important question is – Are you making a profit?
Whether it’s in a business or the business called your life you need to be creating a profit.
Profit is Sanity.
If you’re not making a profit each and every month your business is not going to last very long; and if your business called your life is not making a profit each and every month that means you’re using debt or robbing your assets to get by, and that’s not sustainable or wealthy.
Cash Flow is Reality
Cashflow tells you what is happening in your money world and whether you are going to dive, survive, or thrive.
You can be making a profit but still run into financial difficulty, and that’s because of cash flow.
Cash flow is quite literally how money flows into and out of your life.
If you have uneven cash flow – with periods of big inflow and then nothing for a while, or big out flows when there is low inflow – this can cause major financial challenges.
This is why cash flow planning is super important. You need to know what money will be flowing in and what will be flowing out over the next 3, 6, 9 months so you can make provision for it.
So now you know – vanity, sanity and reality. Revenue, profit and cash flow – what have you been focusing on?
Money is meant to serve us and support us, but we need to focus on the right things to enable it to do so, and not veer off in the wrong direction because we didn’t understand where our attention should be.
If you’re focusing on revenue (income) and believing… “if I could just earn more I’ll be okay”, you are heading for financial trouble because you will be neglecting the things that actually count.
The solution to money problems always lies in one of these other quadrants of wealth – your expenses, your assets and your liabilities.
Forget about the vanity. You and your life is way more important than that.
Stop focusing on the top line, it’s irrelevant.
I’m going to add a fourth focus to the vanity, sanity, reality chain and that is freedom.
Freedom is created by your assets.
So if profit is your sanity, cashflow is your reality, then assets and your increasing your net worth is your freedom.
In the comments below, please share with me which of these four focus points have you been fixated on and which have you neglected?
- Cash flow?
- Net worth and growing your assets?
Do you need to stop worshipping revenue and focus on the other three to truly transform your money life?
Remember your wealth and your freedom is creates one step at a time. Keep taking those steps. Learning how to be a great leader to your money and get on and enjoy your great life.