Personal Wealth and Cash Flow Personal Wealth accumulation and Cash Flow are very closely related. They have an important impact on each other. To manage them and achieve your goal of wealth creation it is essential that you have a good understanding of these two concepts.

Cash Flow - What is it?
It is in simple terms a statement that lists out all the cash that you are going to receive and all the cash that you are going to pay out for a defined period, say a month, a week or it can even be for a year. Normally in the case of an individual the following are his cash inflows and cash outflows.

Cash Inflows Salary and Wages Bonus, overtime, other allowances Rental Income Dividends, interest Any other income, repayments of loan received, etc

Cash Outflows Morgage instalments Rent Income Tax Living expenses Communication Travel Expenses Education Festival Celebration Entertainment Any other expenditure, car loan, credit card payments, etc.

• The goal is to ensure that your total Cash Inflow during the period is not more than the total Cash Outflow during that period.
• If cash outflow is more than your cash inflow then you are not earning enough cash to sustain your current lifestyle. Most likely you are subsidising the shortfall in cash by using borrowed money such as personal loan or using credit cards. If you are not careful, you will sink deeper into debt. You need to start spending less than you earn if you ever want to achieve financial freedom.
• If cash outflow is equal to your cash inflow then you can barely sustain your current lifestyle. If you do not have a savings buffer and if you become unable to work or your income streams suddenly stop then your lifestyle will be affected. If you have goals, then you will need to adjust your lifestyle so you can find extra cash to channel towards your goals.
• If cash outflow is less than your cash inflow then it is a good start. You have extra money leftover after all your spending. You can channel this money towards your goals or invest wisely.
• Only when your cash outflow is less than your cash inflow it will lead to wealth creation and ultimate financial freedom.