This may sound crazy but I know a lot of high net worth people (greater than $10 million) who get into cash crunches all the time.
No, I’m not talking about the pain on not being able to buy a yacht. I’m talking about not being able to cover the mortgage on their home or even the electrical bill.
How could that be?
Well, let’s take a step back. What does it mean to be a millionaire anyway? It means that on your personal financial statement, your assets exceed your liabilities by $1 million or more.
Does that mean you have $1 million of cash sitting there? Probably not.
It just means that you own stuff that has a value that could be redeemed upon sale.
If you own a million dollars worth of gold, you are a millionaire. However, you might not have enough cash coming in on a monthly basis to pay your bills. You could sell your gold but that might take a little time.
You might even own a great big apartment building and have millions of dollars of equity. However, if your rents don’t exceed your expenses, there is no cash to pay your own bills.
You could even own a huge business with millions of dollars of revenue but no profit. I see it all the time. I own one of those businesses RIGHT NOW!!! (Uggh)
Although these scenarios might sound ludicrous to you, they happen all the time.
Now you might be wondering what’s the point of being a net worth millionaire if you can’t pay your bills?
That’s a very good question. Don’t you think it might make sense to trade in some of those assets for cash flow?
I’m guessing you answered yes.
After all, it might make a lot of sense to have some of those investments throwing off money that you can actually use to pay the bills!
But wait a second…is it possible that you might be guilty of something similar to these net worth millionaires?
Well… do you own stocks? Are you getting much cash flow from them?
It’s really the same thing you know. When you own a stock you on a fraction of a company. It has a value like any small business that you might own.
But, unless you have some dividend paying stocks, you’re doing the same thing as those net worth millionaires I’m talking about, right?
That is—you own something that has a value but it doesn’t help you pay the bills.
Maybe it’s time for you to trade some of those assets in for income.
That’s not to say that there is no value in holding assets that don’t cash flow. It’s just that I often hear people complain about not having enough “passive income“ to decompress their lifestyles.
These same people often have a significant amount of stocks, bonds, and mutual funds that don’t pay them—just like owning a company that makes no profits.
If this sounds like you, the answer to creating a better lifestyle for yourself might be sitting right in front of your nose.
You may just need to trade some of those net worth assets for some cash flow.