Cash Flow Matters

by | Dec 22, 2023 | Videos

Cash Flow Matters

In video episode #364, Tom covers:
– Cash flow matters – and is crucial at every stage of financial planning, whether starting out in life, getting out of debt, preparing for retirement, or running a business.
– People often focus too much on assets and market movements rather than the importance of how much cash flow matters.
– The S&P 500’s current yield has decreased from 2.4% in 2013 to 1.4%, yet the dividend has doubled from $34.90 to $68, showing the significance of cash flow over time.
– Investment in the S&P 500 has potentially tripled from the start of 2013 (1509) to the recording date of the notes (4700), illustrating the value of long-term investing and reinvesting dividends.

Cash Flow Matters – Episode 364 – Links:

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Cash Flow Matters – Video Episode 364 – Transcript

In episode three hundred and sixty-four, we talk about the importance of cash flow and long-term investing.

A lot of people get hung up on assets and the value of all their assets.

They rarely take enough time to focus on what’s happening with their cash flow, which is so important.

When you’re talking with financial planners, we know that:
if you’re just starting out in life, cash flow matters.
If you are working on getting out of debt, cash flow matters.
If you are getting ready to retire, cash flow matters.
If you’re just starting a business or you run a business, cash flow matters.

So, cash flow matters, is so important, but people just want to talk about assets.

They want to talk about what the market’s doing.
They want to talk about whether they should be getting into some different investment or should be getting out of this now.
Or they don’t like the market or they don’t like the economy.
Or… fill in the blank.

People get fidgety. They get impatient when it comes to investments.

And I think part of that is because they can go online and look and see the values up today, the values down today.
And they think that they have to make a decision. But they don’t. They really don’t.

A lot of times, we talk to folks about the S&P 500, and this is not a recommendation to buy or to sell the S&P 500.
But I can tell you from experience, ten years ago, we would point out to people that the “current yield” on the S&P 500 in 2013 was 2.4 percent.
And people were like, “That’s terrible. Why should I do that? There are certainly other things that I can find more yield on. So, I wouldn’t be buying the S&P 500.”

In fact, if you fast forward to today, the “current yield” on the S&P 500 is 1.4 percent. It’s even less.
And so, people are like, “That’s silly. I would never do this.”

But again, let’s focus on cash flow. Cash flow matters.

Ten years ago, the dividend on the S&P 500 was $34.90.
Fast forward to today, the dividends alone, at the end of 2022, were $68.

So, the dividend, the cash flow alone, has doubled.

What’s happened to your investment in the same period of time?
Well, at the start of 2013, the S&P 500 was at 1509.

Go take a look and see what the S&P 500 is at today. We’re recording this on the day that the S&P 500 is at 4700.

So, if you’re doing the math on the same day that we’re recording – and I know that’s not happening – your investment has tripled.

Your $50,000 dollars is now worth a lot more. It’s worth $154,000 dollars.

And if you were smart enough to say, “I know cash flow matters, but I don’t really need cash flow. I’m just going to reinvest the dividend,” your $50,000 dollars is now worth about $184,000 dollars today. Cash flow matters.

But people want to talk about assets, and I’m not sure why.

That’s the question we try to tackle here in episode 364. Thanks for tuning in!

 

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