Quote:
Originally Posted by sygazelle
Net worth, income vs. expenses, and cash flow are all interrelated.
You are correct that cash flow can drive lifestyle, but only in the short term. That term ends when you run out of cash.
If a person pays attention to net worth and income vs. expense too instead of just focusing on cash flow, the chances of running out of cash go way down.
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I personally focus on cash flow quite a bit - in fact I have a spreadsheet with my project cashflow for the next 2 years plotted out. It's a brilliant tool for me for the "what if" scenarios - "what if I have an unexpected car bill of $x next month" and I can see that I'll run out of cash on hand by a given time. Has been useful when friends have asked to borrow not inconsequential sums for a period, or when I said I would pay for my friends rehab from brain tumor surgery - I could just plug the numbers in, see where everything fell with the home and everything else I have going on, so now when I close on the house I know how much to draw down from investments etc.
I think good cashflow forecasting is valuable, and something lacking in a lot of the online tools like Mint (I stopped using it and developed the spreadsheet for that reason). Mint is great for tracking "this month" although with credit cards often not being aligned a calendar month, they can be a pain in the ass too.