Last issue, we covered business cash flow. With today’s economic uncertainty, it’s time to apply those principles to your personal finances.
What is cash flow?
It’s the money coming in (wages, interest, benefits) versus what’s going out (bills, spending). Irregular billing cycles—monthly, quarterly, annually—can complicate things.
Start with a cash flow snapshot
- Create a simple spreadsheet and list months across the top, income and expenses along the side.
- Subtotal inflows and outflows monthly, then subtract to find your cash flow. Here you’ll see if your cash flow is positive or negative.
- Create a cumulative total for the year under each month to easily spot high- and low-cash months.
Tips to improve cash flow
- Balance large expenses by spreading them out across the year (vacations, holidays, tax payments, insurance premiums, and more).
- Build a reserve during strong months. See what monthly expense drivers are in your life. Cut recurring costs like streaming or phone add-ons.
- Shop your current services. Some of your larger bills may create an opportunity for savings. This is especially true with home, rental and car insurance.
- Pay yourself first. This simple technique creates positive cash flow each month and builds an emergency reserve.
You can’t make improvements without first knowing where you stand. Visualize your cash flow ins and outs, then identify areas of improvement. After all, better planning today can ease tomorrow’s financial stress.
