The 5 Important Tips to Personal Cash Flow
Creating personal objectives is a priority in managing cash flow. A great rule to follow when setting these is to make them SMART. SMART objectives are those which are specific, measurable, achievable, realistic and timely. A simple example is “I aim to save $5,000 for my deposit on a car in the next 6 months.” By having a clear goal in front of you, you’ll be able to track your progress as the deadline gets closer. This consistent measuring will allow you to see whether or not your current path is aligned with your goal, and if need be, allow you to make changes to get back on track.
Create a budget
A budget is an organised plan of money coming in and money going out. By keeping track of expenses and income, you can remain on top of your finances. Minimising the unexpected is an essential part of managing personal cash flow. Without a budget, you cannot hope to achieve this effectively. Creating a budget makes it easier to prioritise your expenses. Ranking your costs, from most essential to least important provides you peace of mind and reasonable freedom to spend where you know you can.
Understand your position
Having a realistic idea of your financial position presents the opportunity to consider potential investments and loans from a place of relative safety. This goes hand in hand with creating and sticking to a well-defined budget. When it comes to finances, you must always be honest with yourself. Taking risks that have real potential to incur financial hardship must be avoided. Investing and loaning money must be done thoughtfully and thoroughly.
Consider costs vs income
This idea should be a natural extension of your budget. Those who struggle to manage personal cash flow are often those who make impulsive purchases. Buying decisions without careful consideration of your cash flow can break the bank. Minimising expenses against income is your primary goal here. Consistency is key in managing personal wealth and this tip is no exception. We have all made unnecessary excited or emotional purchases before. Reducing these by considering costs vs income will allow you to maintain a healthy bank account. It’s not to say, ‘don’t treat yourself ever’ but rather think, ‘can I comfortably afford this?’
Have the right insurance
While nobody likes paying for insurance, getting caught without it when you need it is even worse. Being underinsured or over-insured can both be serious obstacles to your wealth management. While it’s tedious, this is a process you cannot afford to rush. To prepare for the future, you must have a plan in place if something causes you to be unable to meet repayments. Planning for the unlikely but possible future is vital to managing personal cash flow. Income protection insurance may be the biggest part of this, but the advice remains true for other aspects of managing your funds.
Having a sensible organisation of cash flow will offer you peace of mind and the ability to spend with the knowledge of safety. For more information regarding the smart management of your wealth, reach out to our experienced team at Provide Wealth.