E4 - Cash Flow vs Net Worth - The Real Measure of Financial Freedom

We love to track net worth — but here’s the problem: you can’t spend it.

In this episode of Before the Returns, Jaden Zubal breaks down why cash flow is the real measure of financial freedom, and how targeting net worth can keep you stuck chasing numbers instead of living your purpose.

💡 In this episode, you’ll learn:

• Why growing net worth doesn’t always lead to more freedom
• The mindset shift from “owning more” to “accessing more”
• How cash flow creates purpose and flexibility
• The dangers of lifestyle creep — and how to stop it
• Why renting can sometimes be the smarter move for your goals
• The role of systems and structure in building lasting wealth

Jaden also shares a real client example that reveals how focusing on income and flow — not just assets — can accelerate your ability to live the life you actually want.

🔑 Key takeaway:
Wealth isn’t about how much you have — it’s about how much you can control and use.
Cash flow is what keeps money alive and working for you.

Learn more at www.jadenzubal.com | Follow @jadenzubal | Join the *Before the Returns Weekly* newsletter

📩 Questions or ideas? Email: jadenzubal.wealth@gmail.com

⚖️ Disclaimer: This podcast is for educational purposes only. It is not financial, tax, or legal advice. Always consult with a qualified professional before making financial decisions.

Chapters

• 0:00 Intro: The problem with net worth
• 2:30 Cash flow vs net worth explained
• 5:00 Real client story: translating wealth into income
• 8:30 Lifestyle creep and managing expenses
• 12:00 Savings-first strategy
• 15:00 Renting vs owning revisited
• 17:00 Key takeaway: Cash flow equals freedom

Transcript

SPEAKER_00: 0:00

Welcome to another episode of Before the Returns. On today's show, I want to spend some time and talk about the difference between cash flow and net worth. Which one is more important? Which one has more value to using money as the purpose and not as the goal? Right. Because one of the primary focuses of our show here is to figure out how to make money more purposeful and use it to fulfill the things that are important to you in life, not just be the thing that's important in life. Right. Many of us who have worked our whole lives and gone through different struggles and built businesses and built real estate portfolios, or those right at the beginning of doing that. What we have found, what I have personally found, is that when I first started, a lot of the focus that I had was, yeah, I had this concept in my mind of reaching a certain net worth. And even today I can still be guilty of that sometimes because there's certainly a draw to hitting a net worth target, right? Guess what happens? Oftentimes we hit a net worth target and then we just simply increase that target. We make a new goal and we shoot for whatever we think should be the next target. So if you set a goal of a hundred thousand, then five hundred thousand, then a million, well, guess what? You're gonna hit a million, and all of a sudden the target becomes two million, then three million, then five million, it keeps going. I've seen it happen with lots of people, and that's okay. It's not a bad thing, as long as we are also fulfilling the real purpose of that money, right? It's not just about grow, grow, grow. It's what are we doing when we get those net worth figures? What is the purpose behind it? And are we really fulfilling that purpose? Are we doing the things that bring value to our lives and value to the lives of those around us? In last week's episode, we really talked about renting versus buying and how sometimes keeping control of your cash flow actually builds more wealth than owning the thing itself. Right. So in in the discussion last week, it really was hey, if I rent this house and we used a home that was worth$750,000. I don't recall the exact figures, but it was something like the mortgage payment on that house was going to be closer to$4,000 a month. And we could rent the same house for high$2,000. So the difference there, that cash flow that we were able to hang on to, is that cash flow more important than the net worth figures that you might see from the growth in your house? And depending on the situation, it as far as overall return and overall growth, it gets better to own the longer you have that you stay in the house, right? Short-term renting was better. But now we're going to turn that conversation a little bit and say, if we are able to increase cash flow, which is really more important, right? The cash flow figures or the net worth figures. Because again, we can continue to grow our net worth, we can continue to build to these new goals and these new figures all the time. But let's say you have a$5 million net worth, but all$5 million of it is locked up in your business, in your house, in other investments, what good does that do you? Right? If you've got five million dollar net worth, but you only have five or ten thousand dollars a month in cash flow, it didn't that having that larger net worth didn't help you change your lifestyle. It didn't increase how you're able to fulfill your purpose. In fact, a good example of this is um I actually just met with a client of mine today, somebody that I've had for a couple of years now. We've worked together, really great guy, has a great income, and cares a lot about what he's doing with his money. Like he's very purposeful about it, purposeful about growing his net worth. But really, what the conversation boiled down to, and we spent about an hour talking about this today, was his net worth wasn't really that important in the grand scheme of things. What he cared about is translating that net worth into an income figure, right? He has an income figure in mind and he has a timeline to get there so that he can start to cut back on some of the work that he's been doing the last few years and still be able to live the same lifestyle and enjoy the same things that he's doing now and help his kids in the same way, that type of thing. By doing some of the strategy that we talked about, he's enabling himself to essentially take what he thought the net worth figure needed to be and actually be able to decrease that net worth figure and increase the income or the cash flow figure that he's able to take home, which increases the overall lifestyle and the fulfilling of the purpose that he actually has for the money, right? Part of this is we love the idea of net worth, we track it, we post about it, and we compare it, right? But here's the problem you can't spend net worth. I'm gonna hit on that a couple of times in this episode today because you can't spend it, right? You can't spend ill-liquid assets, can't live off of it, and it doesn't pay your bills. So, why does cash flow create freedom? When money is flowing, you can make decisions from purpose, not from pressure. That's why some people choose to rent, run leaner, or invest differently. Circling back to the client of mine that I spoke with today, the conversation revolved, at least for a little bit there, around this idea that his current cash flow situation is probably about double what he actually lives off of, right? Which means he has the ability to save and invest fairly aggressively today, which is great, right? He's worked really hard, he's built a career that's been really successful. And now he can start to focus on doing one of two things. He's either going to build for net worth or he's gonna build for cash flow. I mean, you're kind of building both at the same time. But if we have an end goal and a target in mind, then we can say, okay, which one of these two things are we really trying to get as the outcome? Pretty much always, if you start to put some deep thought into it, it's we're building the net worth for cash flow, right? So why not just start from the beginning to build for cash flow instead of looking at that 10 or 20 or 30 years down the road? And that's how we got into that conversation of here's how we can create the type of income that you're looking for, and we can probably do it sooner, and we don't even need to get the net worth figure as high as you originally thought that you needed to. So cash flow creates freedom because it enables you to focus on your purpose and not just simply on building that that next goal of your net worth figure. Freedom isn't really about what you own, it's about what you can access, right? Because again, if we have five million dollars in net worth, but we can't access any of it, is that really freedom, or is that just a nice figure in the background, just a feel-good number? So cash flow shows how healthy your financial structure really is. I'm gonna use myself as an example, right? I've had really good times in my career and I've had some less good times in my career. And for context, I do financial strategy as part of my career. But because I'm a financial strategist, I really believe that if you're gonna talk with a strategist ever, you need to talk to somebody who actually does what they tell you to do, right? If I'm gonna teach my clients to do something, I've got to make sure I've done it as well. I invest in real estate, I own a separate business and I work on building other businesses and I invest in other businesses. In that career and in the things that I've done, I've experienced years where we've had really great cash flow and years where the cash flow hasn't been nearly as good. And that's just the nature of business, right? Not everything works out perfectly, not everything goes as planned, so you're gonna have fluctuations. That experience over however many years that's happened, I've been doing this for probably about 10 years now. Throughout that time period, what I've learned is that my net worth can continue to go up. But if I'm having a bad year from a cashless standpoint, I don't care much about the net worth figure. Right? The net worth figure doesn't help me live better or help me take care of my kids better. It doesn't help me create a really comfortable lifestyle for my children and give them the things that for me, that's a big part of my purpose, right? It's I want to make sure that I set my kids up and educate them and help them create a really good lifestyle when they're older. And my net worth figure doesn't do that. That doesn't matter in the grand scheme of what I'm trying to do here. So the cash flow has really played a big role in that and it's pushed me to invest in more of more assets like real estate and businesses and things that can generate steady cash flows, because then instead of doing this, I can start to stabilize and do more of this, right? Just general steady increases in cash flow over time. So what's the other side of cash flow? There's this thing that I talk about with my clients all the time called lifestyle creep, right? Some of you may have heard of it, but it's essentially where as your income increases, we have to be careful not to let our expenses just follow the same trend. And in fact, sometimes people let their expenses increase faster than their income, right? But lifestyle creep is just where let's say you get a 10% raise. W-2 employee, doing pretty well, you get a raise. A lot of people get that raise. One, two, three months go by, don't even realize that it happened. Like we obviously recognize you got the raise, but you don't feel all that much better. You don't feel like you got a big benefit out of that raise because what's happening is you just naturally start to spend more money. Happens all the time. So from a cash flow strategy, one of the things that I've personally adopted is this idea that when I bring in income, what I'm going to do is I've already pre-budgeted and allocated my expenses. And I'm going to take my expenses. So my income all let me back up. Income all goes into the place that I'm saving money first. Okay. So it starts there. Then I shift what I want to spend for that month to a different account. So it moves over. So that's my spending account. And that's what I get to spend for the month. So I'm actually I've adopted essentially a savings first strategy, right? So from a cash flow perspective, I have a lot more control over it, and my savings has gone up significantly. Like the amount of or the percentage of income that I save goes up because I force the savings. So it helps with the long-term cash flow strategy, right? Because if your expenses rise as fast as your income, you don't have structure, you have motion without progress. So when you start to think of it that way, you stop trying to look rich, right? The net worth figure, and you start building a system that actually lasts. So to summarize that last part, because I really want to hit this hard for a second, there's there's really only two ways to improve your cash flow, right? Either make more money or you manage the money that you have in a better way. So you can't always control income immediately. That is something that you can control over time, right? You can improve your skills, you can improve the places that you're spending your time and your energy, and you can focus on building different income sources, getting a different job, whatever it is that you feel like you need to do to do that. So that's something that you can control maybe in the long term, but in the short term, it's usually easier to control our expenses. And I don't mean I I'm not a big proponent of the, hey, you can't go get a drink every day or those little things. Yeah, they might add up a little bit, but is that really the make or break? No, I don't think it is. I think the make or break is the bigger stuff that we let slip. It's the buying the expensive cars and feeling like we need to upgrade the homes quicker than is maybe necessary, or whatever it is, right? It's finding the balance between lifestyle. Like you want to live a good lifestyle and you want to live a lifestyle that's comfortable, but you have to balance that with where you're actually at in life today and don't get too far ahead of yourself. Because again, it's not about looking rich, it's about living a lifestyle that makes sense and growing towards something that actually enables you to live your purpose. Money's not the purpose, right? The purpose is to be able to do the things that we really enjoy and bring value to ourselves and to those around us. So building systems comes into play here, right? We have to build the right systems, the right processes. That savings first system that I talked about, that's a big part of it. Another part of the system that I personally use is a strategy we call family banking. And it's implementing a system that helps us to better utilize the savings that we put off to the side, the things that we invest in. So before we make investments, we can use this system and this strategy to grow and protect our money. It's not something I'm going to get into this week in this episode, but it is something we will talk about in more depth in future episodes. So let's bring all this home for a second. This is exactly why renting can sometimes make more sense than buying, because renting is one of the ways that at least in today's environment, we can control cash flows a little bit better. Because something that I think is really overlooked. I'm I'm I'm gonna try not to get on a soapbox here with this, but when you're renting versus buying, there's a lot of hidden costs when you own homes, right? I've as we've talked about, I've lived in homes that I've owned, I've lived in homes that I've rented, and I own rental properties currently. There's a lot of expenses that come with owning, and especially when you live in the home that you own, sometimes you don't always think about how expensive it is to maintain, or this kind of plays into lifestyle creep, but sometimes we just want to upgrade different things in the house and we naturally just spend more money to slowly do that. When you're renting, there's no maintenance cost because that's pushed back to the owner. You tend to not worry as much about upgrading things in the home because it's not your home. And so I think there's I think there can be value to doing that at the right times while you're focused on building the income sources and building other things up. But again, every it's a very much a case-by-case thing. And I don't necessarily think one is better than the other just on the surface, right? You really have to look at the whole picture for that. If renting helps you keep flexibility and use your money with purpose, then it can be a smart move, though. Right? So the house isn't the win, the cash flow is. Okay, and that's really important. The house is not the win, the cash flow is. Wealth isn't about how much you have, it's about how much you can control and how much you can use. Cash flow is what keeps money alive and working for you. Okay. So with that, I'm gonna start to wrap up the episode a little bit here. The title of this podcast is Before the Returns. And why is it before the returns? Because as you've heard so far on the first four episodes that we've done here, everything we talk about is going to be systems and structures and just having the right things in place so that you can better control the outcomes that you get and better utilize the resources that you have access to. And cash flow is one of the strongest ways to control your resources. Okay, so next time I'm gonna go into a little bit more. We'll start to dive a little bit deeper on what happens when your money never rests. Okay, because financial strategies and systems, how can we allow our money to do more without necessarily having to change the things we invest in or the things that we want to invest in? So, as always, money is the tool and purpose is the goal. So if this helped you shift how you think about money, how you control your money, or the things that you maybe want to do in the future, please share it with someone who needs to hear that freedom isn't just a number, it's a flow. See you all next week.