The Basics of Cash Flow Management

The Basics of Cash Flow Management

The Basics of Cash Flow Management is important as it helps to ensure that you have enough or even excess money to save up for other usage every single month. Here are a few simple steps that you need to take to manage your cash flow:

Track your current monthly expenses on a daily basis for at least 3 – 6 months.

Analyze your monthly expenses to find out where does your money goes to.

Make a list on the expense items that you can cut down on.

Start setting aside 20-30% of your income to pay yourself first. Put this money into a separate savings account which you will not spend other than for investment purpose.

Plan your expenses budget every month after you have completed the above steps. Make a list on all your expenses and set a budget to it. Make sure that you stick to your budget and not give in to temptations. Make sure that your total expenses budget and planned savings does not exceed your total income per month.

For all major or big spending of about more than USD$1000, you need to plan for it, and ensure that your purchase is genuine and not due to impulse. Hence you need to take note of the cost involved and set aside a sum of money every month towards a fund and only purchase the item after your fund has collected enough to pay for it entirely.

With the above, you should be able to have more savings which you can use for investment purpose to contribute towards your financial freedom or retirement.

Take note that Good Investments are assets that are able to put more money into your pockets, not take money out of your pocket, in both short term and long term. Items that you purchases that takes money out of your pocket every month (creates expenses) are liabilities, not assets!

As long as you do not spend more than your income minus the amount that you need to set aside to pay yourself first, your cash flow will be fine! Take action to do that today! Do not procrastinate.