10-8-24 Financial Freedom Affirmations and Visualization – Cash Flow vs Networth

Today we are doing our Financial Freedom Affirmations and Visualization and discussing the difference between Cash Flow vs Networth.

Be sure to watch the replay and do your own heart breathing, affirmations and visualization!

Cash Flow

Cash Flow is income minus expenses. In order to create wealth, you need to have positive Cash Flow. So you have to create an income that is greater than your expenses. With that extra money, you create assets.

The difference between the rich and the poor are that the rich have assets that generate income to pay for their expenses, while the poor people only have expenses.

The middle class have liabilities that they think are assets (according to Rich Dad Poor Dad). These liabilities include a house/apartment, car, computer, phone, etc.

So what is an asset?

An asset is something that makes you money.

The simplest example is a savings account. It makes you interest.

Stocks can also make you dividends.

Real estate and businesses can be assets.

Real estate (but not the home you live in) and businesses can be assets.

So what is a liability?

A liability is something that takes your money.

Your home is a liability if you own it or not because you have to pay property tax, mortgage or rent, repairs, etc.

A car is a liability that you have to pay gas and repairs.

The key to becoming Financially Free is to have passive income greater than your expenses. Passive income is income created from your assets.

When your assets create enough passive income that you can pay for all of your expenses, then you are Financially Free!

Networth

Networth is your assets minus your liabilities. Liabilities are what you owe or your debts. This can be a car loan, credit card or line of credit debt, mortgages and so on.

To calculate your Networth, first, you add up the value of all of your savings accounts, stocks, bonds, properties, businesses and so on. These are your assets.

Then you add up the value of all loans and debts. These are your liabilities.

Then you subtract your assets minus your liabilities. The number you get is your Networth.

If you have $1,000 in savings and $30,000 in your 401K and your car is worth $5,000 then your assets would be $36,000.

If you have $10,000 of credit card debt, a car loan of $10,000 then your liabilities are $20,000.

So your Networth is $36,000 – $20,000 = $16,000.

When people ask what you are worth, they are talking about your Networth.

Conclusion

In becoming financially free, you need to focus on creating passive income and keeping expenses below your income at the same time. When you do that your Networth will naturally increase over time.

If you find that your income is above your expenses, but your Networth keeps decreasing, then you are spending your assets and/or increasing your liabilities. This makes you poorer.

If you find your income is above your expenses and your Networth is increasing, then you are increasing your wealth and on the path to financial freedom.