Cash Flow Management
What is cash flow management not?
Cash flow management is not budgeting.
What’s the difference between cash flow management and budgeting?
A budget is estimating or setting a target for what you wish to spend. Cash flow is the amount of money actually coming in to, and going out of, the household. Cash flow management is being realistic about what you actually spend. It is about knowing exactly what comes in and then being prepared for all of your expenses.
People often get to the end of a week, month or year and go “Whoops, I blew that budget!”. That is not good cash flow management. Good cash flow management is about paying yourself first and your bills second. Paying yourself first means that you’re more likely to achieve your goals and your vision.
When extra cash comes in
We tend to live to the level of income that we have coming in. So if we get a pay rise or a bonus we often go out and spend it. Got a nice tax cheque? More often than not, people plan to use it all on a holiday or some other fun indulgence. Very few of us plan to save some part of that new-found cash for the longer term.
The key to cash flow management
Cash flow management is deciding where the money is going to go before it comes in. It’s not waiting for it to come in and then spending it mindlessly. It is planning for a holiday, for example, rather than just taking one because extra cash has come your way.
The ultimate cash flow management strategy:
Know exactly what your expenses are
This is NOT a budget. It’s understanding what your current requirements are. Less than 2% of people that I ask know what their current expense level actually is. You need to know what your expenses are and you need to look at what you spend versus what you earn.
Know exactly what your income is
Be absolutely clear on what you earn after tax. Compare that amount to your current expenses. Are you earning more than you are spending? If your answer is ‘yes’, the difference is your cash flow.
Have a clear vision
Knowing where your cash is going versus where you want it to go is a great motivator to managing your cash flow properly.
Automation is the key to great cash flow management. There is n longer any need to spend time and effort shuffling money around accounts. The more automated you can make your cash flow the better. You can spend more time on what your vision is about – and imagining what it will be like when that vision becomes a reality.
Answer these questions:
- • Do you know right now what your outgoings are each week/month/year?
- • Do you know right now what your income is each week/month/year?
- • Have you begun a long-term wealth strategy with the surplus cash?
If you answered ‘YES’ to one or more of those questions, congratulations! You are way ahead of most people.
If you answered ‘NO’ there are some actions you can take immediately. We can walk you through our wonderful cash flow management program. Doing so will ensure your cash flow is completely automated and that it supports the goals that you really want to achieve.