Cashflow Committed vs Networth Committed Mindset | Which One Suits You Better ?
This article delight talks about these two kinds of mindsets ; Cashflow Committed vs Networth Committed Mindset. Do you want to know which one are you !? Let’s travel through this article in order to learn more about it.
What is a Cashflow vs Networth committed mindset?
Cashflow Committed Mindset
Suppose you have to buy a car, a vacation, a training course, an expensive mobile, or anything for that matter, you say to yourself – “Let’s take a loan and I commit my future earnings (cashflow) for this purchase”.
You basically trust and rely on the future to consume TODAY.
When you buy things and repay them back in near and far future, you depend too much on your future cash flow, you are a cashflow-committed person. You don’t think twice if you can afford something or not, because everything looks within your reach because everything is sorted IN FUTURE. The future is unlimited, the future is always amazing where you will EARN with no difficulty. If this mindset has become second nature of yours or you are almost addicted to buying things on loans, then you are a cashflow-committed person.
Networth Committed Mindset
On the other hand, there is another mindset at work!
If your nature is to consume when you have the money, or else you don’t want to consume things or defer them in the future, you have Networth committed mindset. Before buying anything, you are committed to first building the networth required for it and prefer to pay out of your networth.
Even if you get a chance to take the loan easily, you deny it because, in your world, you want to be fully in control of your future cash flow. Your internal design is to first acquire wealth, and then out of that wealth you want to pay for things.
What if there is no income in the future? What if you don’t earn enough? Why have the headache of keeping track of how much loan is remaining? These are your mental statements when you try to shift on Cashflow committed mindset.
Cashflow Committed vs Networth Committed Mindset | Which One Suits You Better ?
Most of the people who create good wealth and are on the path to financial freedom are those who are of “networth committed mindset”. As they keep their desires in check and are successful in postponing their wants to the point which makes sense and also balanced out things. On the other hand hand, easy availability of loans and the peer pressure to match the lifestyle of friends circle along with rising aspirations and low control over one desire is the reason that most youngsters today are becoming cashflow committed investors.
You will also see that most of the cashflow-committed investors fall into a debt trap and then cashflow commitment is not just a choice but it becomes their inherent nature of living a life. When a person does not create their wealth creation on time and when their desires are more than what they can afford, it’s natural that one will turn out to become a cashflow-committed person. Net Worth committed lifestyle eventually wins out as there is no debt trap due to losing job or business going bust. However, if it is an asset that appreciates , you may consider to have a cashflow mindset if you cannot afford it, straight away eg. your dream house. It is best to draw a line at what is good for the individual. When you want to buy house you must think with cashflow mindset but when you buy daily groceries or do regular online purchase it is best to have networth mindset.
Final Takeaway
Before 90s, the culture of buying things on loan and paying in the future was almost non-existent in the common man’s life. You first saved for things, built your wealth, and only if you could pay for it, you bought it. So everyone was forced to be a net-worth committed investor. However, in the last 25-30 yrs, the culture of buying first and paying later has gained popularity. And we are nudged to become a cashflow committed investor from all directions. Having cashflow mindset is dangerous as it may lead to debt trap. But having complete networth mindset also makes you keep of increasing the capacity to buy but never allows you to spend it. So creating a balanced way among the two mindset is bet way out.
Read also : What Should Be Your Ideal Net Worth to Considered Wealthy | Net Worth Calculation ( https://thebrightdelights.com/what-should-be-your-ideal-net-worth-to-considered-wealthy-net-worth-calculation/ )
For further reading on mindsets on Finances, refer https://www.forbes.com/sites/forbesfinancecouncil/2020/05/26/your-mindset-is-everything-when-it-comes-to-your-finances