Everyone’s heard the phrase “Cash is king”, but that’s far from true these days. Maybe decades ago it was true, but anyone who insists that cash is king these days is either lying or misinformed. Interest rates have been close to zero for some time, and if financial prognosticators are to be believed, then we may well soon see the introduction of negative interest rates, meaning that you’ll have to pay banks to keep your money for you. In short, you get no return on cash being shored up in a bank account.

Is Cash King?

Since lockdown, quantitive easing has meant that cash is being printed at an alarming rate. It’s estimated that up to 70% of all dollars in existence have been printed since lockdowns began. The more quantitive easing that occurs, the more destructive the effect against the value of cash itself.

Cash itself can’t grow in value unless it’s being invested. Remember that if it’s not growing, it’s decaying. If your money isn’t working for you, then eventually it’ll work against you.

Today there are two types of money – capital and income. 

Capital comes in lump sums. It’s attractive to suddenly receive a windfall. That’s why people desire a sudden incoming pile of zeroes.

Income is the steadier, incoming, ongoing, residual variety of money – the steady stream if incoming revenue that might not seem as sexy as a windfall, but which nevertheless acts as the lifeblood of your business and lifestyle.

We need to recognise that the world has changed in fundamental ways, and that the only way to keep our financial boats afloat is to make sure that we have a steady supply of waves upon which to sail. Income is the way forward. We must seek to ensure steady, reliable income, and there are proven methods we can employ in order to ensure this.

Cashflow = King

The first step is to turn your cash into an asset. When you do this, you protect your cash from yourself and any emotional changes that may cause you to want to access your cash and deplete your reserves.

The second step is to leverage your asset. Turn your asset into something against which you can borrow. If you have an asset worth £100,000, then can you use it as leverage in order to borrow £500,000? If so, then you can begin earning income from a new asset worth five times more.

Your asset should also be one that produces an income of its own. Property, for example, can produce a recurring revenue of income, far more valuable than some static or almost invisible interest rate.

The resulting goal we should all strive for is one of recurring, impregnable, bulletproof income. When we spend it, it reappears the month afterwards. When we use this income to reinvest, we are secure in the knowledge that it will be replenished again a month later.

It’s time we ceased to believe that cash is the king, when in reality, the asset that produces regular income is king. It’s time we stopped our cash from depreciating by shoring it up in reserve, and started our money appreciating in value by investing in an asset.

Rob Moore
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