I had a somewhat heated discussion the other day regarding the differences between wealth and cash flow. The person I was speaking to was convinced that high cash flow and having cash coming in from multi sources was wealth. I disagreed.
I said that wealth is something that is built. If you put aside some of the monies coming in, you'd be building wealth because you'd have something to show for it. Otherwise spending everything doesn't build wealth, it just means you have lots of money to spend.
One's ability to make money isn't really an asset because you cannot cash yourself in. You can chose to keep producing by working thus making an income or a business which would be considered a tangible asset.
This fellow I was talking to is 39 years old and does not have a penny saved but is extremely motivated to create multiple income sources. I pointed out that having a base income that can be relied upon can be a valuable thing while other business developments are being created.
He disagreed because he is needing ALL of his income from his primary job in order to pursue said opportunities. He is even going to cut back on his primary job in order to spend more time with the businesses he feels more passionate about.
I didn't think that was wise as none of the new businesses are even close to breaking even and cannot be counted upon right now to even pay a utility bill. I told him I would not jeopardise the main income at this point until the others start showing some sort of longer term success.
So I was labeled a non risk taker, which is fine. All I know is that each work day allows me to build wealth and it has already been proven successful. I can show those results numerically. I'm not as concerned about how much I make, rather how much I am able to keep while living an interesting life.
He cannot show me anything other than some minor success and a whole lot of monthly expenses after 3 years of being an "Internet entrepreneur". He has not attained even 20% of his expenses back yet but still continues to spend in hopes of hitting the big time, the day where he manages to tweak the magic Internet formula whereby the world will discover him.
That is why he isn't concerned in the least with having no savings because when he hits it big, he'll be able to catch up so fast, the monies he has spent would be a drop in the bucket compared to what is coming in. (I've seen his product and it isn't anything I would spend money on personally)
He didn't believe in building wealth the old fashioned way (ie. like what I'm doing). He feels that I am not making my money work for me. That I've missed out on so many opportunities by being so conservative. If he had access to my money, he'd know exactly what to do with it...
I wished him well as this is obviously the path he has chosen to pursue. He has big plans for the next couple of years. I told him I did too. Maybe we'll meet up then and compare notes.