When it comes to our money, most of us are juggling a few things at once. Between saving for retirement, tucking money away in case of an emergency, and trying to pay down any lingering debt, it can be tough to keep track of our cash flow. But if you want to stay afloat financially, it's important to have a good handle on it. Here are a few tips on how to manage your personal cash flow effectively.
Keep track of your expenses. This might seem like common sense, but it's easy to let your spending get out of control if you don't track where every dollar goes. Start by creating a spending plan and tracking all of your expenses each month.
Create a savings plan. Another key part of managing your cash flow is creating a Cash Reserve. Tucking away just a little bit each month can add up over time, and will help you cover unexpected costs and short-term goals.
Get rid of debt ASAP! Carrying high levels of debt can really wreak havoc on your finances, so do everything you can to pay it off as quickly as possible. The Debt Destroyer methodology is an easy-to-follow way to do this.
When you Manage Money, Grow Savings, and Destroy Debt, you'll keep your personal finances in check and ensure that you're always heading in the right direction with your finances!
1. List all income sources
It's important to know where your money is coming from and when it arrives in your bank account. This will help you manage your money, cover your expenses and save money.
Income sources can include:
Wages from employment
Interest from investments
Dividends from stocks or mutual funds
Pensions or annuities
Social security benefits
2. List your regular expenses and track your spending
Your committed expenses are those that occur on a monthly or annual basis. They can include things like rent or mortgage payments, utility bills, insurance premiums, and loan repayments.
Flexible expenses can include things like medical bills, car repairs, or home repairs, even groceries and gas. Reviewing your bank statements and credit card bills to get a handle on these
Tracking your spending can help you identify areas where you may be spending out of habit, and subconsciously. Cashflow Leakage is that spending we all do that is out of habit, or impulse.
For example, do you stop at the same cafe every day, and get the same thing without even thinking about it? How much did you spend?
What about that item you buy at the grocery stor that you automatically get without even thinking about it?
Video streaming services, and subscriptions that you never use?
These are all examples of leakage and can also happen in the form of impulse purchases. It's the type of spending that has the most impact on living within your means.
3. Live within your means and manage debt
One of the most important aspects of financial health is living within your means or spending less money than you earn and avoiding debt.
If you're struggling to live within your means, there are a few things you can change. You may need to make some changes to reduce your Cashflow Leakage. You may also need to increase your income by finding a better-paying job or earning additional income by starting a side-hustle.
Create a plan to pay off debt using the Debt Destroyer method. This involves paying off your debts from smallest to largest, regardless of interest rate. As you pay off each debt, you'll have more money available to put toward the next debt on your list.
Once you live within your means, you can start working on paying off any debt you may have. This will help improve your financial health and stress levels.
4. Create a Cash Reserve
Saving money each month can help you reach your financial goals. It's important to start small, even if you can only afford to save a few dollars a month. The best way to start is to identify how much of your spending in leakage, and redirect some of that to savings.
You can automatically transfer a fixed amount of your income into savings. This can help you make saving money a habit.
Another way to save money is to create a specific savings goal, such as saving for a down payment on a house or for retirement. Once you have a goal in mind, your savings will grow much faster and you'll reach your goal sooner.
Knowing where your money comes from, where it's going, living within your means and paying down debt while adding money to savings is the best way to build financial stability.
The Financial Foundations Course will guide you step by step through the process, with easy-to-follow lessons, and fillable worksheets that will get you managing money, destroying debt, and growing savings in no time!
Enroll in the Financial Foundations Course today to get started on your journey to financial stability.