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11 Cashflow and Compounding

What is cashflow and where does it come from?

Cashflow is perhaps easiest defined by breaking the word into two parts – cash and flow.

Cash is another word for money, and flow, to use an example, is how water moves down a river. So cashflow is all about the way money moves.

Just as with water, cash has a source and a destination. Over time, the source and the destination may change.

At different times in your life the amount of cash which is flowing will also change. Sometimes it may be a trickle and sometimes it may be a raging river.

Whether you are managing a trickle or a river, managing cashflow is about tapping into the different sources, and then effectively and efficiently managing the flow.

Conceptually, cashflow can be generated from four main sources.  

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