Why Cash Flow Matters

“I don’t like how she/he spends money”

I have sat in hundreds of meetings with couples over the past decade. And while these words are rarely spoken outright, the feeling is common. One spouse thinks money should be spent a certain way. The other disagrees.

Even in my own home, my wife and I have had this same back-and-forth for 12 years.

• I want her to cut back on Amazon and Target.

• She wants me more engaged in budgeting.

It is almost comical how this conversation repeats itself. Yet despite our differences, we have built a strong financial life together. The reason is simple. We’ve consistently worked to improve cash flow, every year, without question.

Cash flow is not glamorous. It is one of the most basic disciplines in finance. But it is the foundation. I still remember when I got my first checking account 20 years ago. My parents had me balance my checkbook by hand. I even keep a booklet from the 1940s from my late Grandma Betty, where she carefully wrote her bank balance and tracked every penny of interest earned.

Cash flow is not the next big investment idea. It is not complicated strategy. But when couples know their numbers, money stops being a source of stress and becomes a tool that serves their life.

Most financial stress, whether personal or business, comes back to one thing: cash flow.

Here is how I define it:

Cash flow is the rhythm of your financial life. It is the steady movement of money into and out of your accounts. It includes income, expenses, and investments. It is a critical measure of financial health because it determines your ability to meet obligations, pursue opportunities, and maintain stability.

In retirement, the rhythm changes. Your paycheck stops and income must come from investment accounts, pensions, Social Security, etc. If you do not have clarity on how money is moving, or how it should move, retirement will simply amplify what you currently feel.

Cash flow is everything. And the families who master it experience more peace, more control, and more freedom.

Businesses are far wealthier than people are

It was reported this year that Nvidia could reach a trillion dollars in revenue in the coming years. To put that into perspective, the top 1 percent of U.S. households might bring in $650,000 a year. It would take a family in the 1% 1.5 million years to match what Nvidia produces in twelve months.

Unreal.

But here is the key point. Companies like Nvidia do not grow wealthy by chance. They have thousands of employees who are all working to do one thing: improve cash flow. 

Shareholders demand it. Growth depends on it. Businesses die without it.

Remember, cashflow isn’t just about spending - it’s about growing better income, controlling spending, and and positioning yourself to take advantage of opportunities when they appear.

As an investor, you know financial statements can be clear as mud. Earnings reports often contain smoke and mirrors.

But cash flow cannot be faked.

It reveals the health of a business more clearly than anything else. In fact, when you buy a piece of real estate, a stock, or an operating business, what you are buying is cashflow.

The better the cash flow, the more expensive the asset.

The best operators focus on it relentlessly:

• “Profit is secondary. Cash flow matters most.” — Peter Drucker

• “It is the lifeblood of business.” — Richard Branson

• “We were watching the speedometer while running out of gas.” — Michael Dell

This isn’t theory, remember the cash flow issues with Jimmy Buffett’s $275m estate? You can have millions in assets and still feel squeezed if cash flow isn’t optimized. One can also have a modest portfolio and feel secure if it is.

The better the cash flow, the better the outcome. Always.

Cash flow helps you compound

If the world’s greatest entrepreneurs obsess over cash flow, then families heading toward retirement should too. Once the paycheck ends, cash flow is the factor that determines whether assets compounds or slowly erodes.

Here are some of the most common cash flow traps I see:

• No tax plan

• Ignoring RMDs

• No financial plan

• Stretching for yield

• Poor timing of withdrawals

• Over reliance on tech stocks

• Overspending early in retirement

• Not knowing average monthly spend

On paper, these look small. Done overtime, they can derail a retirement. Overspending in the first five years, for example, can permanently reduce what is available later. Ignoring RMDs can trigger unnecessary taxes and penalties. Stretching for yield can expose a family to risks they never needed to take.

These mistakes ripple outward. They affect relationships, lifestyle choices, and peace of mind.

Marriage is not about perfection. Retirement is not about perfection. And cash flow is not about perfection either.

It is about rhythm.

It is about consistency.

It is about knowing your numbers and avoiding small mistakes that compound into big ones.

Cash flow is not about cutting every expense or living smaller than you hoped. It is about freedom. It is about clarity. It is about designing a retirement where your assets serve you and not the other way around.

Here’s the takeaway: If you do not measure and control cash flow, no amount of money will feel like enough. If you do get the rhythm right, everything else falls into place.

Thanks for reading this week,
Tom