Why Grant Cardone Says ‘Cash Flow Is King’
Written by
Peter Burns
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
In the world of money, you’ll often hear the phrase “cash is king” thrown around. Having cash on hand means you’ve got the flexibility to make a big purchase or pounce on an investment opportunity at the drop of a hat. When the market dips, having cash means you’re protected. While there are many benefits to having cash on hand, some experts don’t consider this to be the best way to solidify your financial position.
Grant Cardone, an American entrepreneur, author and investor, agrees that having cash on hand is an important aspect of healthy finances, but he thinks maintaining a reliable cash flow is even more valuable.
The Negatives of Holding Cash
As with anything, there are negatives to hoarding large amounts of cash. The first risk of having too much cash on hand is inflation. Even though keeping your money out of the stock market can safeguard your financial health to a certain degree, inflation will gradually cut down on its value.
Investing in conservative cash-generating assets instead can help you mitigate the risk of inflation and increase your net worth over time. Cardone backed this point, saying that not putting your money to work for you only erodes the value year after year. He also pointed out that there’s more to worry about than just inflation.
In the past, putting money into a savings account may have done wonders and helped you build toward retirement. However, savers who take this approach today will also have to contend with the risk of tariffs. Tariffs are taxes placed on imported goods. Many people make the mistake of believing the foreign exporting company pays this tax. In reality, though, the importing company pays the tax, and then it often must raise its prices to remain profitable. Those who save all of their cash instead of investing it to generate a passive income will likely lose more in the long run when tariff-driven price increases eat away at their purchasing power.
Why Cash Flow Is Better
Just about everyone knows what cash is, but what about cash flow? Cash flow is the movement of money into and out of an institution, business or an individual’s bank account. It’s the financial way to describe how you earn and spend money over time.
Cash flow can take on many forms, like earning profits from selling products, lending out money in return for interest or earning dividends from stocks. Cardone specifically recommended buying up income-producing assets and letting them work for you instead of holding onto heaps of cash reserves.
Cardone said investing in real estate is the best choice, but it may not be what you’re thinking. Real estate investments that create cash flow can be anything from renting out a home or storage space to owning land that produces assets like corn. Cardone goes as far as suggesting that buying a home to live in yourself isn’t necessarily a good idea because you could put that money toward a cash-generating property instead.
A home, even if you’ve paid it off, remains something you must continually sink money into, such as property taxes and maintenance. If you rent a cheaper place instead and invest the extra money into a cash-generating property, you can earn a passive income.
In fact, Cardone’s advice comes from his own experience. Contrary to popular advice at the time, he sold his house, moved into a rental unit and bought an apartment building. Years later, the apartment building went up three times in value, and he was still able to earn money from it as a cash flow asset. This move earned Cardone millions of dollars and was one of his greatest financial decisions.
More From GOBankingRates
