Cash and Cash Flow is “Vision” fuel. After tax income from employment or self-employment, and/or from portfolio investments can be spent or saved. We can use it in any fashion we wish. Of course, there are basic expenses, sometimes referred to as “necessities of life”, that need to be accounted for; a place to live, utilities, food and clothing. Beyond basic expenses are discretionary expenses and saving and investment.
The Natural Wealth® Process divides the Cash (Cash Flow) element into three categories:
Person Cash Flow
Portfolio Cash Flow
Possession Cash Flow
Person Cash Flow is the net income we have from our employment or self-employment activities. Person Cash Flow is either directed to consumption, acquiring and maintaining possessions, or saved and invested in portfolio assets.
Portfolio Cash Flow is the net income from our portfolio wealth assets, our investments, if applicable, our business and real estate assets and if retired, our pensions. Portfolio Cash Flow is either spent on consumption or services, on maintaining possession assets, or it is reinvested into existing or new portfolio assets. As time passes and our personal ability to generate cash flow decreases (whether because of age or health), portfolio wealth and cash flow become ever more important.
Possession Cash Flow is the money spent acquiring and maintaining possessions. On rare occasions, possession wealth assets can generate income. More often though, possessions consume cash flow to own and maintain.
The Natural Wealth® Process helps clients understand the concept of cash and cash flow in building and managing a successful financial life plan and incorporate philosophies and strategies that will help them manage their cash and cash flow more effectively.
The heart of the Natural Wealth® Process is Vision. A clearly articulated Vision and clearly stated life goals are essential to an effective financial life plan.