What is Velocity of Cash Flow?

Become wealthy by identifying and utilizing the velocity of cash flow.

Master Investor
May 05, 2024

Most people have been told the wrong advice about money, such as "The best thing a person can do with their money is save it," but the reality is that that would be the worse strategy for today’s economy. Money is no longer real money.

Such advice is nonsense because is a loosing strategy. Savers are losers. Good debtors are winners and wealthy in today’s economy. We have to keep our money moving if we want to be wealthy. The amount of wealth we possess is determined by the velocity of our cash flow.

The misguided belief that saving money is beneficial

We post an image of a savings register and a piggy bank in an article about the three steps to real estate investment wealth. These are timeless pictures of money from our early years that have left a lasting impression on us.

According to an old proverb, "A penny saved is a penny earned." other than when it isn't.It is not criticizing savers as individuals when we suggest that they are losers. Many wonderful people take the financial savings advice to heart. We mean that in a world that favors investors and is biased against savers, they would actually lose in the game of money which we are all playing.

Let’s breakdown:

Without a question, majority of people instill in their kids the importance of saving money from a young age. They chime in, "A penny saved is a penny earned." When kids get a little older, they tell them stories about the wonders of compound interest. Children are taught that if they save enough money, they will become millionaires when it comes time to retire.

Naturally, majority of people due to a serious lack of financial education they keep the historically low interest rates away from their kids because they themselves don’t even know the importance of studying money and how to become wealthy through investing rather than saving money.

Majority of people will need replace old beliefs with updated beliefs base on the new rules of money.

Or the ability of inflation to gradually devalue money, making it worthless to be a billionaire by the time we retire.

These are unpleasant realities of finance.

The "wisdom" to conserve money appears to be ageless because it persists despite being demonstrated to be incorrect. "Financial experts" still promote the notion that saving money makes us a millionaire.

We do not learn about money in school. Poor people don’t know what these straightforward charts showed here. The best thing we can do with our money is save it most people would confirm about money but that is a poor mindset because money is no longer real money. Most people who have the poor mindset often they hold advanced degrees, they are well-educated based on a specific profession except investing, and many people end working for a government agency that pays them “well” for their time but time in the wealthy mindset has not price. But majority of people are ignorant of the true workings of money.

The velocity of our money determines the size of our wealth. Despite of our background such has nothing to do with becoming self aware of how money operates and know how to use it to our advantage. We all ought to invest in our daily financial education and acitvely invest in sound assets.

The middle class and poor class park their money

The majority of the poor and middle class people take poor mindset advice and put their money in an account in the hopes that it will increase in value over time and make them wealthy. It won't.

The poor mindset people stash their money in jars or savings accounts within their homes or even worse they dump their hard earned income into fake assets with the illusion that they are assets and going up in value. Creating a a false sense of building wealth on paper. They receive either nothing at all, they put money monthly into the fake asset, they get penalized if they take their money earlier, or a pitiful savings interest rate. In the meantime, the money loses value due to inflation, gradually making them poorer. They are losers because of this.

The middle and poor class makes many types of savings and invest in fake assets

They may have a savings account, but they also put their money in mutual funds, 401(k)s, and other passive investment vehicles, as advised by the so-called financial experts. If the stock market doesn't fall, the return might be marginally higher than a savings account, but the idea remains the same: store our money in one place and don't move it, and hope to become wealthy before inflation and market fluctuations.

People that belong to the middle class wager money

When it comes to money, those who are wealthy yet ignorant of the financial system are among the most careless.

They enjoy gambling while pretending to be investors.

This is evident in the fixation on buying the newest hot stock, flipping houses, and pursuing the newest get-rich-quick scam.

In actuality, the wager can occasionally pay off, sometimes handsomely. It is still a bet, though. They are shifting money, albeit in an unorganized manner.

The wealthy manage their finances significantly differently because they recognize that there is a methodical formula governing the velocity of money.

Cash Flow velocity and investing with the house funds

To be clear, there is a gambling component to all investments. The distinction is that there are experts and amateurs in both gambling and investing. A novice is not well-versed in the principles underlying their wagers. An expert is aware of the precise formula to boost their chances of winning—and winning large.

Professional gamblers in Las Vegas get as close to using house money as possible when they play.This implies that they only utilize the money from the casino, their wins, and no longer use their own funds to gamble after they have made a small investment in a game.

They want to start using other people's money, or OPM, as soon as feasible.

Expert investors engage in a common game. They aim to take their money out of an investment as soon as feasible and use the investment's revenue to make their money work for them.

The definition of money velocity

When discussing money, visualize an electrical current. Although electric currents are extremely strong, they have a flaw in that they always have to flow forward. An electric current dies when it stops.

Thus, money functions in the same manner. Money that is saved, or parked, eventually dies due to inflation and interest rates, as was previously mentioned. For money to endure and expand, it needs to relocate.

And that's how the velocity of money is defined. A experienced investor knows that in order to keep their money alive, they must constantly transfer it into new assets.

Furthermore, they are aware that simply investing money in assets would not suffice; rather, they also require the cash flow from those investments in order to transfer the "house money" into other assets. They generate exponential wealth growth in this way.

Keep in mind this basic principle: in order to be a true investor, we must first received money in the form of passive income and capital gains income. Then, investing the cash flow forward into sound assets that our companies control.

The job number of a wealthy entrepreneur is to raise capital. The number one skill is to sell without selling using systems and smart marketing. The job number one of an inside investor (capitalist or master investor) is to make money make more money through sound investing.

This is the formula for the velocity of cash flow:

How is the velocity of cash flow determined? Positive updates! It's a straightforward formula. But take note we must put in the time, effort and other resources. It's one thing to learn this formula. Putting money to use and gradually accumulating riches is another.

Here is the formula for the velocity of cash flow:

Invest our capital and debt into a cash flowing assetSavings is okay as long as we have a purpose for the money to put into a sound asset as soon as possible. And investing it ought to be the aim. Once more, money saved but not invested that is, moved will wither away.
Recoup our capital invested backWe need to receive money in order to be an investor. Even while we may invest in assets, you are not truly an investor if those assets do not provide cash flow for us. As a speculator, we hope the value of our assets will increase.This element of the method has been used numerous times. Many wealthy entrepreneurs have invested in apartments, made upgrades and increased rents, and then refinanced the apartment loan to recover their investment.
Keep control over the cash flowing assetThe exponential growth of money over time—far more so than compound interest—is a key factor in the velocity of money. How? By holding onto the assets that still provide cash flow for us and using the proceeds to buy further assets.When we refinance an apartment building, we retain the building, receive the money back tax-free, and continue to receive rental income from it in the form of passive income. Any cash-flowing asset, whether venture money or a firm, can be used for this.
Transfer my funds to a new assetThis represents the velocity component of money's velocity. We don't sit on your money until we receive it back from the initial asset. We transfer it to a different asset! We spend the money we receive from the refinancing of our apartment complexes in yet another fantastic real estate venture. We are currently investing with the banks’ money despite having two excellent, cash-flowing assets.
Repeat the formula againQuite easy to comprehend. We can create enormous fortune by using this recurring formula again. The rich get richer in this way.

There are two main advantages to the velocity of cash flow formula

The velocity of cash flow is the best formula to follow if we want to be wealthy, and it has two main advantages.

It considerably lowers our risk:Expert gamblers understand that there is virtually nothing to lose when using house money. They still have their money, and they are now free to be inventive.The same concept is understood by seasoned investors who recoup their capital and utilize the cash flow from those assets to fund new ventures. By manipulating cash flow to create wealth, we lower the risk associated with our personal investment. Made a poor choice in investments? It's alright. Make another wise investment by taking what we have learned from our previous ones. No offense, no hurt.
It enables us to compound money more quickly.After reading thus far, hopefully it should be clear to us that investing in money velocity will increase our wealth far more quickly than putting it in savings and hoping for interest and appreciation. Similar to a flywheel, it begins slowly at first, but once momentum builds, our revenue compounds at an incredible rate. This explains why millionaires such as Bill Gates are unable to spend or donate their wealth quickly enough. Their money is moving so quickly that they would be unable to keep up with it, even if they tried to give it away.

Enter the money-making velocity game.

Now, this is where we actually start playing the game of money like a master investor. Spend some time today determining how to get our money moving rather than just parking it. Take our wealth courses and read our eBooks to truly understand the wealthy people's perspective on cash flow velocity and how to obtain it fast. The easiest method to learn is to start, really doing something today. Everything is at our finger tips. The time isn now for us to engage in real-world investing, we will be more confident since creating Positive Cash flow is easier today than ever before and it will provide us the chance to demonstrate our expertise without risking only our own money because money is created with debt. Therefore, we use good debt to invest.