In the world of finance, there are plenty of “rules” and opinions. Some people tell you to put every dollar to work, chasing high returns, while others preach the importance of saving. But today, we’re here to tell you why, beyond all of that, the most foundational rule is that cash is king. It’s a principle that, when followed correctly, can give you the upper hand in both good times and bad.

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Bruce and I often dive into financial topics that challenge the mainstream advice, and today is no different. On this episode of The Money Advantage Podcast, we tackled the controversial yet vital subject of why cash is king. Sure, you've probably heard people say "cash flow is king," but we're going a step further—asserting that holding cash is critical for long-term financial success. And no, we’re not just talking about saving for a rainy day; we’re talking about seizing opportunities, navigating crises, and maintaining control over your financial destiny.

Why Most People Miss the Importance of Cash

Let’s start with why this concept is so misunderstood. The mainstream narrative in personal finance typically revolves around net worth and rate of return. People assume that as long as their investments are growing, they’re financially secure. But let me ask you this: what good is a high net worth if you don’t have liquid cash to cover unexpected expenses or seize opportunities when they arise?

We’ve seen it time and time again, both in our own lives and in the financial experiences of others: you could be a millionaire on paper, but if you don’t have cash readily available, you’re not really in control. And this shift—from focusing solely on net worth to understanding the value of cash flow—is what positions you for true financial independence. When you have incoming streams of cash that exceed your expenses you hold the keys to freedom.

Yet, even that isn't enough. Today, we want to take you one step further: it’s not just cash flow that matters. Having liquid, accessible cash is essential. And here's why.

The Chess Analogy: Why Cash is King

In chess, the queen is the most versatile and powerful piece on the board. She can move in all directions and cover great distances. But it’s the king that’s the most important. If your king is taken out, the game is over—no matter how powerful your queen was.

In financial terms, your “queen” is like your cash flow. It can make bold moves and help you grow your wealth, but if you lose sight of protecting your “king”—your cash reserves—you risk being taken out of the game altogether. Having cash allows you to weather storms, seize opportunities, and maintain your position on the financial board. Without it, you could lose everything, even if your cash flow seems strong.

Why Cash is King in Today’s Economy

So, why is cash so important today, in a world where everyone is chasing returns? Let’s go back to 2009, when interest rates were at rock-bottom levels following the mortgage crisis. People were disincentivized to hold cash because it wasn’t earning them a return. Instead, many relied on cheap loans, believing they could always access capital through the bank when needed.

Fast forward to today, and we’re seeing a shift back to the traditional wisdom that cash is king. Why? Because those who hold cash are in a stronger position, especially in competitive markets like real estate. When you can make an all-cash offer, you skip the waiting period for loan approval, and you stand out as a serious buyer. More importantly, you avoid the risk of not qualifying for a loan and missing out on an opportunity entirely.

Cash vs. Cash Flow: Finding the Balance

Now, don’t get us wrong—cash flow is incredibly important. Having more income than expenses is key to financial stability. But too often, people think in extremes. They focus solely on investing and deploying every dollar, believing that holding cash is a waste.