It’s been said that cash is king, and it’s true that cash can be a very powerful tool. However, cash is not as important for most people as cash flow. There are several sources of income that can provide cash flow for people, and as long as the cash keeps flowing, it’s usually possible to live well.
One of the top ways people are able to access cash flow is through a job. Many people have a love-hate relationship with their jobs, but they still provide a nice source of income. This income can go to a variety of purposes. Cash is fungible, which means it can be used for any need that requires money. Excess money from a job can go toward building capital, and that’s where the second source of cash flow comes from.
Interest and Dividends
Another great source of cash flow can be the money that invested money makes. Savings accounts and bonds pay out interest payments. This is a form of passive cash flow. It comes whether you’re working or you’re laying in a deck chair on the beach. Recently, interest rates have been relatively low, but they are still a form of cash flow. Another source of cash flow that can roll in from investments is dividends. These payments come around when companies make money and decide to pay a portion of their incomes to their shareholders. Most dividends fall in the 2% to 4% range, and they can provide a nice source of cash flow for investors. Like interest payments, this is a form of passive cash flow.
This source of cash flow is more difficult to access than a job or dividends. It requires a settlement from a court case. Sometimes, these settlements can be quite lucrative. People who have settlements from personal injury cases can occasionally opt to receive structured settlements that pay out on a regular basis over time rather than in a single lump sum. If the payments come on a monthly or annual basis, this is a form of cash flow that can really help people meet their financial obligations.
Those who reach 62 can opt to start drawing Social Security payments. Many other countries have similar programs for those who are about to reach retirement age. Social Security payments act as a sort of annuity, and people who draw benefits have a solid source of cash flow available to them. If you have money left over after meeting your obligations, some of your Social Security payments could go toward investments, and this could lead to even more cash flow.
A positive cash flow is more important than having cash alone. Once cash is spent, it’s gone. A cash flow can continue for years or decades, and it can support a person or family indefinitely if it’s big enough. That’s the main reason why cash flow is preferable to cash.