CASH FLOW MANAGEMENT

Managing personal cash flow is essential to building wealth, given that expenditure is one of the few financial considerations over which people can have a certain degree of control. Effective personal cash flow management allows you to cover day-to-day expenses, as well as cater for any fluctuations in income or increases in expenditure. 

Quite often there is a lack of clarity in regards to cash flow. For a lot of people it just kind of happens! Money comes in and that money needs to go out, and payments need to happen. It's quite common to hear the phrase 'I really just don't know where I'm at with it all."  

Personal cash flow management is about having a clear, specific plan around what to do with your cash as it comes in and as it goes out, so it’s got some structure to it. Managing personal cash flow is at the core of any effective financial plan.  

Common cash flow problems include mismanaging the timing of payments and an over-reliance on debt facilities. Debt is definitely an issue. Access to debt means that people end up just drawing on debt facilities, whether it’s their home loan or credit card facilities for short term needs. There isn’t a plan in place, so they just really end up ‘treading water’ or not making progress. It doesn’t seem to be related to the quantum of income either — people can have very big incomes and still be in a whole world of financial pain. 

So where do we begin?  

The first step in implementing a successful strategy to manage personal cash flow is to understand what you actually want to achieve. What are your fundamental needs? What are your goals? What would be the significance to you in achieving these goals or in actual fact not achieving these goals? You need to have the 'why' in place before you can set about achieving them. Establishing precise goals increases the likelihood that you will be motivated to achieve these goals. 

Then we get down to the nitty gritty of thoroughly understanding where you are now. What are your non-negotiable needs and what can be tweaked. This may be a great time to review timing of payments, debt structures, debt management and possibly debt consolidation. A plan is put in place for your cash flow. 

Strategies can then be put in place to optimise debt and develop an investment plan to help you achieve your goals. However, a plan will not be successful without regular review and monitoring. Knowing how you are progressing towards your goals and being rewarded for your achievements is an important part of encouraging you to keep on track. 

Armed with the reality of your cash flow you can choose to do something about it or not. Effective cash flow management will assist you to prioritise your spending and allocate your funds to those things that are most important to you. Reduce debt and save for specific goals such as wealth creation, a deposit for a house, a new car, a holiday, a wedding, education or retirement.  

Unfortunately for many people the process of developing a cash flow management plan is just too time consuming and it is easy to let things slide when life gets a little too hectic. To access help in this area we can provide you with access to the My Money Mentor program. A simple and easy program which is backed by a dedicated team of professionals passionate about working with you to ensure a successful outcome to your personal cash flow management plan.