Why Cash Is King ...
and how to get more of it.
In the last two weeks, my stock portfolio dropped significantly in value, and I don’t care. Why? Most of my stocks are dividend paying and thus far at least, the dividends haven’t been cut. What matters is the cash they’re generating which I depend on for a part of my income. That hasn’t changed. Also, I’m quite a ways from retirement, so I can sit tight and wait for the next upswing. The cash generated through dividends is more important than the value of the underlying stock. Cash is king.
You may have heard that old saying. Basically it means that cash is more important than the value of assets or even your profits. And most of the time it is.
Here’s another example. I bought a house with a 30-year fixed mortgage. My mortgage payments were not going to increase. I worked my monthly payment into my budget, and I knew, based on my income, that it was affordable as long as my income didn’t decrease — not likely. Then, the Great Recession of ’08 happened. My house dropped significantly in value and I didn’t care. Why? My monthly payment remained the same, my income remained the same, and I wasn’t going to sell my home anytime soon if ever. The value of my house didn’t matter and I knew it would go up again eventually because it is in a great neighborhood. And it did.
Cash for Your Business
What is a cash flow statement? It’s cash in less cash out. If your business is cash flow positive every month (more money is coming in than going out), you’ll be okay.
What is an income statement? It is revenue or sales, less expenses. The result is your monthly profit or loss. You can operate at a loss for a period of time, and as long as you are cash flow positive, you can still be okay. Here are some suggestions for how to manage your cash flow in a business:
Cash for Your Personal Life
As far as your personal life, there are several ways you can make sure you have adequate cash on hand for emergencies. Here are some tips:
The bottom line is that you want to always have cash on hand one way or the other for both yourself and your business. Cash is king.
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Stories and snippets of wisdom from Cynthia Wylie and Dennis Kamoen. Your comments are appreciated.