21d • General discussion
What is Most Important in Personal Finance?
Is it Income?
Is it Savings?
Is it something else?
Here are my 2 cents:
It doesn't matter how much you earn, it doesn't matter how much you have saved, what matters most, is the gap between your earnings and your expenses.
Stated differently, your personal cash flow (the difference between your income and expenses) is the most important personal finance metric.
Your Cash Flow determines your trajectory.
Monthly Positive Cash Flow Example --> Personal Finances, Improving Over Time
Earn: $5,000
Spend: $3,000
Cash Flow = $5,000 - $3,000 = $2,000
Monthly Negative Cash Flow Example --> Personal Finances, Worsening Over Time
Earn: $20,000
Spend: $25,000
Cash Flow = $20,000 - $25,000 = - $5,000
It doesn't matter how much you earn.
It doesn't matter how much you spend.
What matters is the gap between your earning and your spending (your personal cash flow).
Your cash flow determines where your personal finance trajectory.
Agree? Disagree? Let me know below 👇
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What is Most Important in Personal Finance?
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