In today's economic environment, cash is absolutely king because, let's face it, you can't eat equity. In business and in your personal life, having sufficient liquid assets to cover emergencies and grasp opportunities when they arise can mean the difference between wealth and bankruptcy.
Cash flow is a fairly simple concept. It's how money flows in and out of your life or your business. It's simple, but it's also one of the primary reasons that businesses and people fail financially. Money masters know that no matter how wealthy someone appears to be on paper, real wealth is only possible with access to sufficient cash.
We've all heard the term "paper millionaire." It refers to someone who has a high net worth as a result of the total market value of the assets he or she owns. Typically this occurs when an investor buys marketable securities that increase dramatically in value. The catch is that, while the numbers look good on paper, the investments aren't really worth anything until they're liquidated, whereas a true millionaire is someone who actually has $1 million in cash.
There's a big difference, and it's a lesson that many people learned during the dot-com boom and subsequent bust in the late 1990s and early 2000s. Some investors became paper millionaires very quickly when their super-hot technology stocks went through the roof. The statement from the broker showed a net worth in the millions, and those investors became the darlings of Wall Street and the ...