Here is an overview on how you should think about cold hard cash.
Cash Buys Time: Simply put, you can use cash to buy yourself time. It can be as simple as a convenient store and parking to as impactful as elongating your life. If you meet anyone who disagrees that cash does not buy time, you can be certain they have never seen a loved one die in a hospital due to lack of top tier medical treatment. No matter what, we will use time to acquire cash of course, but do not forget that the reverse is also true. Hence the phrase “Time is Money”.
Hint for younger guys, if you waste someone’s time they are not going to like you. This will happen faster than you think in a good way or… in a bad way.
Cash is Not an Investment: We have said this many many times, cash in a bank account is deflating in value by ~3% per year. Regardless of what the CPI is saying, your opportunity cost is simply CD’s and 10-year bonds. So in reality? It’s probably closer to a 3-5% net loss per annum. If you believe cash is an investment don’t listen to us… Listen to Warren Buffet.
Cash Flow is King: From the video clip above you can tell there is a clear and implied message. Cash flow is king not cash. As a simple example, if someone tells you they have a net worth of $1M and make $2,500 per month from their profession are you impressed? No. Now if someone says they have monthly cash flow of $50K and a net worth of $500K… You’re going to choose to be person number two. Why? It means you can continuously reinvest into other opportunities.
Take this to a personal finance perspective and apply it to your own life. Before you buy/invest in anything you should have a clear idea of how exactly you’re going to turn the position into a cash flow positive event.
Cash is Ammunition: Hate to refer to the video again, but if you listen carefully he says “we will always have cash around but anytime we have surplus cash around I am unhappy”. Therefore, the second implied message is to create a minimum cash balance and find a way to invest the rest.
Lets take this to a personal finance level again. If you have money sitting around for longer than a year then this money absolutely needs to be opportunity money. You’re losing 3-5% per year so you better have a rolodex of possible ideas coming your way.
Cash Makes Friends: Most people believe having cash makes you have the “wrong friends” and that you’ll find out who your *real friends* are. In reality, the first idea is completely and utterly false and the second idea is absolutely true. When you finally make it in life, the people who clap and congratulate you are going to be your friends for life. The ones that beg you to help them and the ones that say you don’t deserve it or become jealous… Go ahead and cut them off. Their loss anyway.
You will be surprised at how the cards play out. Don’t worry about the one time drop in friends, you’ll end up making many more friends because successful people all share a similar mindset.
Cash Makes You a Lot Happier: We have said this a million times, but it will be a short bullet here. Anyone who says it doesn’t matter is either excruciatingly rich (0.001%) or broke. Play the odds and you know you’re likely listening to a broke person when they say money doesn’t matter. The fact is, real cash allows you to do anything you like. Re-reading point 3, you are only well off if you can survive off of cash flow from investments and maintain a happy lifestyle.
This makes it incredibly obvious as to why it makes you happier. You don’t have to do anything you don’t want to do. So when you hear that all rich people are fat and unhappy, you can just go back to the classic move… Smile, nod, agree and ignore their future requests to meet.
Cash is Not a Cure: It takes many years to realize this, but one single thing will never fix your life. Even though it solves hundreds of issues for you, there is literally not *one* thing that will make you entirely happy and cure all of your problems. In general, happy people have the following qualities: healthy, positive social life, positive sex life, work they enjoy and no financial issues. In short cash is not a cure but it knocks out two important ones, health and financial issues.
If you can read between the lines here, the one thing that comes close to being the cure for happiness (if you’re depressed)? Yep you guessed it, Game.
Cash Creates Baseline Trust: If you had to ask someone to watch your bags at the airport, would you choose the unshaven backpacker or the man in a high-end business suit responding to emails on his phone? Naturally you choose the person in the suit. The reason why cash creates trust is related to point 6, if someone has money they have no interest in taking anything from you because they don’t need to. Go find a wealthy neighborhood… then go find a poor neighborhood… then ask yourself… Do I trust the people that surround me?
For the astute reader, you’re going to realize you feel slightly uncomfortable asking the man in the suit to watch your bags compared to the questionable unshaven young man. Why? You realize his time is valuable.
Cash Makes You Mean: It took several years of work experience to understand the phrase “the truth hurts”. What does this phrase mean? It means if you are direct or blunt with people they will be offended because most people want to hear fairy tale pick me up stories instead of the truth. When you become successful you’ll find they have one dangerous quality. If they like you, they will tell you how it is for better or worse.
So before you become upset when you dislike the advice given by a wealthy person… ask yourself… Did he/she tell me the truth? The real world is much much tougher than a few words of advice from a stranger.
Cash Makes You More Attractive: You can interpret this in many ways and in practically every way you’re going to be correct. Unless you have honestly lost your mind, you’re going to choose to hang out with a wealthy individual when compared to a broke individual. All else equal.
Summary Remarks: Hopefully you now know everything you need to know about cash. 1) it doesn’t buy happiness, but it helps a tremendous amount, 2) it is not an investment, 3) money buys time, 4) cash gives you a level of trust and 5) cash allows you to decipher your social circle.
Now instead of hating it, lets find a way to get more of it to hand to people we like.