“Making more money will not solve your problems if cash flow management is your problem.”
– Robert Kiyosaki
Cash flow is the backbone in money management. Without a good cash flow, it will be difficult to execute a long-term financial. A healthy cash flow is essential if one wants to achieve financial freedom. In case you are facing challenges in this area of personal finance, here are some tips that you can immediately apply:
Track your expenses
Cash flow has two aspects: Income and expenses. If you are employed, it is easy to track your income since it is coming from one source. What’s more difficult for many is the tracking of expenses. It would seem tedious to list down every peso that we spend, so making this task as convenient as possible would help.
I use my planner to list down my daily expenses. From there, I will transfer them to a spreadsheet (either daily or weekly) that summarizes my monthly expenses. Some people might prefer using some mobile application for tracking expenses. My problem with that is that I don’t get to see the overall picture of my expenses and budget so I prefer the spreadsheet. You may also want to upload this file so you can access and update it anytime. MoneyMax.ph also suggested budget mobile apps such as Expensify, Wally, Money Monitor, and Monefy to do expense tracking while on the go. It is a tedious process, but like any business, it is an important step.
Set your budget
The main reason for setting a budget is to make sure you don’t overspend and go beyond your means. So this step is as important as tracking your expenses. To start, look into your ATM and wallet and add the total amount of money you have. List down all the things you will be spending on from today until the next payday. Make sure you don’t exceed the total amount of money you currently have. In case you are going overboard, you can set the excess expenses as payables to be deducted from your next salary. Do the same on the next payday. You’ll probably go beyond the budget a month or two of doing this, but once you get the hang of things, it’ll get better.
Consolidate your debts
In case your cash flow is showing that you are paying too many debts, it would be a good idea to find a way to consolidate them into just one payable. This way, it will not be confusing and you could also save paying too much interest. The immediate step when you have too much debt to worry about is to look for a source with a lower interest rate that will pay off all the other debts.
Assess which expenses to cut
Whenever I track expenses with my clients, almost always I will see them surprised that they are spending so much on an item or two. Once you realize that you are spending more on an item, you will now be conscious and you will reduce that, assuming you have the will to really change your spending habits. Going cold turkey on some unnecessary expenses will be difficult, but not impossible. In case it will be a challenge, start by lowering your budget for those items rather than cutting them off completely.
Find other sources of income
You’ll be surprised; reducing some expenses is actually the easy part. Finding other sources of income to boost your cash flow is definitely a lot harder simply because your enemy is time. It is, however, very possible for one to have multiple sources of income. All you need are good time management and a strong resolve to fix your cash flow problems. A word of caution, though, more money doesn’t necessarily mean that cash flow problems will be solved. More income would just mean more money and more expenses to track.
These tips for getting your cash flow in the right direction make a good start. These tips can get more personal depending on one’s current situation. It can also get a little more complicated depending on the financial mess one is in. What is important is that there is a plan to get out of the mess and set the path in the right direction—the path towards financial freedom.
Jeremy Jessley Tan, RFP is financial adviser and a member of the Registered Financial Planner Association. He has shared financial advice at various channels such as Money Sense Magazine, ANC On The Money, and the Money Summit and Wealth Expo.