cashflow – the most important word in the finance world
Have you ever heard about “cashflow” ? It is the most important term in personal finance. It influences every aspect of your civilized life. It is about flowing money from and into your pocket. If you subtract your monthly expenses from your monthly income you get your monthly cashflow. If it is a positive number, you can use it for example to buy a new calf.
Whatever generating your income is called “asset” and whatever you spend for things that don’t generate any income for you is called “liability”. Your goal should be to have as many assets generating passive income (income that you don’t have to work for) as you can and as little liabilities as you can.
Any of your assets is a liability of someone else and any of your liabilities is someone else’s asset. Also the same thing can be an asset in one case while a liability in different case. For example, if you are a taxi driver, your car is an asset because it generates income for you. On the other hand, if you just own car for your entertainment and it does not generate any income for you, it is a liability.