How To Manage Your Personal Cash FlowFast Action Finance SEO
As they say in business, cash flow is king. A vast majority of small businesses in Canada collapse not because they are not viable but simply because they do not manage their cash flow properly. It is not very different when it comes to personal finances. The inability of individuals to manage their cash flow is part of the reason so many people are struggling with debt and are unable to achieve their financial goals. How do you go about managing your cash flow to ensure that you stay above the water? Here are a couple of quick and easy tips to do that.
It is difficult to understate the importance of budgeting when it comes to the management of your cash. Quite simply, a budget is the cornerstone on which all other personal cash flow management strategies are based on.
By making a budget, you proactively allocate your finances across your various expenditure areas and at a glance, can see exactly where the bulk of your cash is going. Apart from this, budgeting allows you to quickly know if you are living beyond your means and where exactly you are going off the rails. This allows you to make adjustments to correct the anomaly.
For example, if during your budgeting process you realize that the cost of running your car is putting you in the red, you might then consider using public transport on some days and thus saving some money, or changing your car to one that is cheaper to run. Without a budget to help you do this, you would struggle to understand where your biggest expense areas are and so would not be able to do anything about them.
Live within your means
This is an old adage that rings true now as it did many years ago when it was coined. Quite simply, live in such a way that not only fits your current expenditure but also allows you to set aside a few dollars every week or month as savings. Just like the budget, this is one of those things that can have a profound impact on your cash flow.
Most people who struggle with cash flow more often than not live lives that are beyond their income. Set a goal to pay all your bills and obligations with 85% of your income and save the 15%. In a year’s time, that 15% will be a significant figure that you can invest to broaden your income.
Separate your expenses from your income
This may sound very strange but it makes perfect sense. Most people often increase their expenses when their income increases. For example, if you get a salary raise, the first instinct is to go out and buy that big screen television you have been dreaming of or that flashy car.
What that means is that because you increase your expenses in line with your income, you never really experience the advantage of the increased income. In fact, people often decrease their cash flow when income increases because that new flashy car probably requires more gas than the previous car that you had. By disassociating your income from your expenses, it means that you work to keep your expenses at 85% of your income or even try to lower then and pass on the increases on your income to your savings or investments. This way, you are able to pay off your debts more quickly or make more investments that will yield greater returns much later.
Try and increase your cash flow
As you work to reduce your expenses, aim to also increase your cash flow so as to have more to save. Think of innovative ways to do this such as starting up a business or getting a second job. Remember that if you are looking for cash to start a business, you can quickly and easily access car title loans in Toronto to help you get the business up and running. Increasing your cash flow will help increase the gap between your income and your expenses and lead to more savings for you.
Managing your personal cash flow is about managing the gap between your expenses and your income. By understanding your expenses and working to reduce them, you can increase the amount of cash that you have available and help you from spiralling down into debt.