Finance 101: Cash vs Cashflow - Know the Difference

Nimesoma story ya mzee Miano Kaminja who blew 7M payment on hookers, booze and a car he couldn’t drive. It is a sad story, so I have taken the initiative to write this post for posterity.

Cash = A sum of money e.g 7M

Cash flow = Monthly Income e.g 50k per month

You finance a lifestyle using cashflow, not using cash. If you use cash, it is only a matter of time before you go bankrupt. If you get a windfall today like Mzee Kaminja, the first thing should be to use that 7M to expand your cashflow, then improve your lifestyle with that cashflow. There is nothing wrong with booze and hookers if your cash flow can finance it. If Mzee Kaminja used that 7M to become a landlord in his village, he would afford to improve his lifestyle for life from the rent without going bankrupt.

Unfortunately, many people don’t know this judging from what we witness with old (supposedly wise) retirees. They all get millions and they all go broke in the first five years. Even here in the city, when a guy gets a 5M or 10M windfall, the first thing he does is to upgrade his lifestyle with the cash. This is a classic error people make repeatedly.

If you get a windfall, there is nothing wrong with improving your lifestyle. How you do it will determine whether you end up broke after a few years, or you maintain that lifestyle for a long time. If you get that windfall, expand your business, buy income generating property etc, then use the higher income to finance your lifestyle e.g better car, better hood etc. If you use the windfall to upgrade your lifestyle directly, your journey to the bottom has begun.

TLDR; Cashflow, not cash, supports your lifestyle. If you use cash to upgrade your lifestyle, you will go broke.


To become wealthy, you must be go through a tedious character development.

Most people I have seen who get a lot of money like a prize or compensation without learning the process go broke after a while.

Some people can’t be wealthy no matter how much money you give them.

Well articulated gathee…financial illiteracy has been a major waterloo even to the most of the sophisticated urbane savvy looking people who in their efforts to keep up with the joneses tend to dig themselves in a financial hole…I think one need a lot of mental power so as not to lose focus in this process of wealth creation.

Give a guy 15M windfall today and watch him upgrade his lifestyle instantly.

One of the main reason we fail as Africans or Black People at large is the fact that we do plan ahead or plan for the future. We love living for the moment and showing it off. It’s very important for us to show that we made it by purchasing shinny value-depreciating toys in the shorted amount of time possible. It is very rare for Kenyans or Africans for that matter to put a significant amount of money for retirement-- because if we don’t see it then it does not exist. Even those who genuinely work hard and succeed in business, whatever is passed on to the next generation rarely goes beyond 1 generation regardless whether it’s counted in 7 figures. Instant gratification is how we roll. The time it take to convert cash into sustainable cashflow just creates confusion for us and is more than our brains can handle. We are not wired to think that way.

On side note, @Azor Ahai are you millionaire?

Niko na 99 bob kwa Mpesa.

[SIZE=5]Mungich danganya toto jinga.[/SIZE]

[SIZE=5]Let’s use your bogus figures: an instant 7M windfall VS 50K a month cash flow.[/SIZE]

[SIZE=5]50K a month adds up to Kshs 600, 000 in a single year, meaning it would take 11.6 whole years to reach the 7M mark. [/SIZE]

[SIZE=5]Dear reader, if you receive a windfall go ahead and upgrade your lifestyle disregard hiyo domestic animal @Azor Ahai [/SIZE]

[SIZE=5]Granted you live within your means and invest part of your cash in a profitable venture utakuwa sawa tu.[/SIZE]

Eating seed capital vs seeds of capital never ends well.

I did not imply any relationship between 50k and 7M. Sijui hiyo relationship umetoa wapi wakili.

This is how you lose cases by jumping the gun.

Simple idea in principle. You will be surprised how many people don’t understand it even in old age. A few lucky ones learn it early in their 20s and apply the knowledge going forward. Others learn it too late like Mzee Kaminja.

Hata sasa give a jobless or low earner $120k and watch him upgrade immediately to a $2000/month lifestyle and be bankrupt in 5 years. I have seen it happen many times. You can plug in any figure but the mathematical logic is the same.

Link tusome hekaya ya Miano.

As an aside, Mimi nikipata 10M imesimama I’m going to blow it on booze, mairungi and the finest women. It is my money, kwani?!

Wewe unaongea kama mtu hajawahi guza pesa mingi. I have seen many people make a lot of money including myself, and NO ONE can resist the temptation of blowing a shitload of money on some stupid pleasures at some point after they make it. What you better hope for is that the money keeps flowing for more than one year because EVERYONE who has money has had at least one year where they just closed their eyes and spent money recklessly. Usidanganywe na motivational speakers hapa, there are ideals then there is reality.

How do you think I learned this lesson?? I had this experience in my early 20s. Made the mistake and learned from it.

As long as you can generate that income again, hakuna shida. Kama ni windfall or once in a lifetime opportunity like this guy, then of course extreme caution must be taken.

Easier said than done. You will do the same if you came to a windfall. It’s called human nature. You can only defeat human nature for so long.

You were born with nothing, and will go to the grave with nothing. I like that analogy.

Blow a fraction of that money fellas, life is temporary, death is permanent

Many people end up blowing their first windfall…inaitwa baptism by fire