Archive | October, 2013

The fundamental financial discipline

Key and old woodBeing successful in any arena requires discipline. The most fundamental discipline that is required to be financially successful is to maintain positive cash flow.

Positive cash flow is a simple concept. You will hear it communicated in different ways time and time again.  Here are a few of the more common ways it is articulated:

  • spend less than you earn
  • a part of all you earn is yours to keep
  • saving is income not spent
  • pay yourself first
  • the total of your taxes and expenses must be less than your total income

In other words, the cash that flows out of your bank accounts for bills and expenses, must be less than the cash that flows in from your work, investments or pensions. The difference is the amount that becomes available to save, repay debt and invest.

It may be a simple concept but it is a discipline that is hard to forge. As human beings we are often tempted to “have it now”. When we choose to buy something now and spend more money than we have earned, we take away from our savings or our investments or we go into debt. We are making a choice that takes us a step backwards financially.

Positive cash flow is a simple concept that comes with a simple truth – if you are not committed to maintaining a positive cash flow, then you will never experience true prosperity.

So now is a good time for you to decide whether you are prepared to commit to this discipline.  If you are not, rather than save your money, save yourself some time and disengage from this blog. Without a commitment to this fundamental discipline, my blog won’t help you. Feel free to come back when you are ready. For the rest of us, let’s commit to this fundamental financial discipline and remain on the path to prosperity.

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