How do you manage your cash flow?
Cash flow management is a great way of diving deep into your personal finances in order to assess your cash flow situation. By getting really clear on where your money is coming from and where it's going too, will greatly improve your ability to make important financial decisions around your lifestyle choices, career, retirement etc. This in turn, can help you to smash out some clear financial goals.
Cash flow can be looked at as either being positive or negative. By knowing where your financial situation falls will greatly help you to make any necessary changes and avoid making bad financial decisions.
So what is positive cash flow? If at the end of the month you have managed to pay all bills and living expenses and still have money left-over, then this is positive cash flow. The opposite occurs when you are unable to make bill payments and you have no money or a negative bank balance at the end of the month.
If you have ongoing positive cash flow, you will have surplus income which should be building up, putting you in a position to accumulate wealth providing your circumstances don't change.
If however, you have ongoing negative cash flow, you will need to make some rather prompt changes in order to improve your financial situation moving forward. This is often much easier said than done and, like anything done properly, yes, it does take time but it will pay off.
If you find yourself in a negative cash flow situation, some areas you could look at include:
your income stream - would you consider a career or job change to increase your income? Are you in a position to ask your employer for a raise?
look at your needs versus your wants or necessities versus luxuries - are there any areas that you are living excessively? What's important to you that you'd prioritise and what areas could you reduce or let go of?
utility bills - become more mindful of your water, gas or electricity usage. Small adjustments like turning off the lights, hanging out the washing instead of using the dryer and having quicker showers, can make a difference.
reviewing your services such as insurances, phone plans, memberships and utilities to look for similar quality, but cheaper alternatives. Do you use your Foxtel or Netflix subscriptions?
plan meals in advance and shop wisely by purchasing only as much food as you need.
If you've managed to find some surplus income having worked on the above or you are already in an ongoing positive cash flow position, you may want to explore:
making extra repayments on your home loan if you have one.
paying off any debt that you may have - pay the higher interest loans first.
putting surplus income into a high-interest savings account - it can grow with the power of compound interest while still giving you access to these funds when required.
reviewing your superannuation and consider additional contributions.
looking at some investment options for wealth creation.
working with us to develop an investment strategy.
It doesn't matter your age or stage of life, it's never too late to gain an understanding of your cash flow movements, but it's how you manage your cash flow that can have the most impact.
Real cash flow management involves understanding all of the elements that make up where your money comes from, where it goes to and then looking at your options to create a life that is comfortable, secure and provides the freedom to choose where each road takes you!
If you would like to find out more about ways that we can help you with your cash flow management, we'd love to hear from you.
If you'd like to know what's involved in engaging our services, you can read about it here. Life. A journey worth planning.
Sound Life & Superannuation Agencies Pty Ltd trading as Sound Life Financial Services is the Authorised Representatives of Synchron, AFS Licence No. 243313.
The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
