Cash Flow, Debt Management, and Living Within One’s Means: Not Necessarily in That Order

One of the most important aspects of one’s financial plan is their cash flow.  After all it’s the fuel that runs the engine.  Many people struggle with basic money management, which by the way, is not rocket science.  Cash flow is simply how much money comes in, your income; interest, dividends, etc. and how much goes out, your expenses; fixed and variable.  The difference is WHAT’S LEFT OVER.  Once you do the analysis your net cash flow is either positive, discretionary income or negative; LBYM (Living Beyond Your Means).

Like with most situations you need to:

  • Define the Problem
  • Identify Potential Solution
  • Implementation
  • Periodic Review

So once you’ve established your cash flow you can create a budget.  A budget is simply a plan to determine how you will allocate your cash flow.  After all, in order to save more money you have to either make more or spend less.  Most people realize what their big expenses are, i.e. mortgage, car payment, tuition, etc.  But what about all of the little things you may be spending your hard-earned money on?  If you buy a $5 cup of coffee every day that amounts to $1,825 per year.  Now $5 may not seem like a lot, but do you think you could use an extra $1,800 bucks today?

Most people who have negative cash flow probably have not taken the time to list all of their expenses.  We use a cash flow questionnaire that gathers everything from mortgage, dry cleaning, charitable giving, etc. to that $5 cup of coffee.  Once you know exactly where your money is going, you will be able to determine if anything could be eliminated.  Once you become more self-conscious you may stop the next time you say “I need that.”

In addition, you will examine all of your credit cards, determine what interest rate you are paying and then begin to eliminate that BAD DEBT!

At the end of the day you should be able to determine what is coming in, exactly what is going out and save/invest the difference.

Finally, don’t be afraid of having a budget.  It is not a penalty — just a tool you could use so that you could live life today and be comfortable about tomorrow.




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  1. Businessplans November 9, 2017

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