Cash flow is a concept. It’s a quality, not a dollar amount.
On the other hand, cash (money), is a dollar amount. You can look at your balance sheet and see how much money you have in the bank at a specific point in time.
Profit is a dollar amount. You can look at your P&L (profit & loss statement) and see what your profit was for a specific period.
Cash flow is NOT a dollar amount. It is more like the concept of happiness in life.
Happiness is a quality, a feeling. Each of us has our own definition of happiness. But we know when we are feeling good about life… and when we’re not.
You have a sense for when your life is moving in the right direction. And you have a sense when things are going against you in your life.
In the book The How of Happiness, Sonja Lyubomirsky describes happiness as “the experience of joy, contentment, or positive well-being, combined with a sense that one’s life is good, meaningful, and worthwhile.”
A good way to “check in with yourself” is to rate your happiness on a scale of 1 to 10. It is a quick way to put a number on how you are feeling.
This same approach works when evaluating your cash flow.
Cash Flow = Happiness
I define cash flow simply as HAPPINESS.
And I rate it on a scale of 1 to 10 every month. It is a fun, and surprisingly effective, approach to understanding your cash flow.
Here is how the monthly rating of your cash flow works.
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