positive cash flow margin is absolutely essential if you are to accomplish either
long-term or short-term financial goals. Without a cash flow margin, you cannot
accumulate in order to meet long-term goals. In addition, each of the four other
short-term goals - tax reduction, increased giving, debt reuction, and increased
living expense - can only be met by having a positive cash flow.
order to reduce taxes, either additional expenditures must be made for such things
as increased giving, IRA's, tax sheltered investments, and the like, or income
must be reduced. Either increased deductible expenses or reduced income will result
in tax reduction. However, both require that there be a positive cash flow to
begin the process.
a positive cash flow, increased giving is not an option. Once there is a positive
cash flow, however, and it is used to increase giving, that decision results in
decreased taxes because charitable contributions are deductible. There are many
people who plan all of their tax reduction through giving. However, they had to
have a cash flow margin to begin the process.
if you want to reduce your debt principle payments, you must have the excess cash
to do so. If you are "going in the hole" by overspending, then there
is no way to get out of debt until you generate a positive cash flow. After debt
retirement that extra amount can be used to reduce debt further, which in turn
increases the cash flow.
Lastly, if a couple or individual has as a short-term goal to increase the level
of their lifestyle through a new home purchase, a new car purchase, vacations,
additional gifting at Christmas, or eating out more often, they must have a positive
cash flow to have the additional funds.
expenses and debt go hand in hand. Typically, debt is used to fund living expenses
and, conversely, without the ability to borrow, the ability to increase the lifestyle
is not there.