Do you ask yourself the same question every month – “where did all my money go?” if you do, then you need to understand how to manage personal cash flow management
Don’t let the fancy name trick you; a personal cash flow management plan is a plan which effectively manages your cash flows, so you don’t have to ask your friends to pay for your coffee at Starbucks. We’re not talking about a simple budget plan, but a plan for everything – which tells you how to use the cash drops down each month in your bank account.
We are talking about a highly effective cash flow management system that tells about living the life you want. Most people overlook a personal cash flow management plan because they aren’t aware of its importance. The cash flow plan ensures that your spending is aligned with your current-day priorities, along with your future goals. Effective cash flow management helps you Striking a balance between your work-family life. Intrigued? Continue reading to find how to make your own Personal Cash Flow Management Plan.
Start by asking yourself some tough questions
First things first, you need to ask yourself how much are your earnings? Do you have any passive income source, or are you completely dependent on your 9-5 job? Some people have a natural talent for managing money without much thought. If you think you are this person, then answer this question? Do you have a significant amount left over each other that adds to your overall saving, or do you anxiously wait for the next paycheck because you’re flat broke?
If the latter is you, then you already know what we’re about to say – you need a personal financial planning guide.
Personal financial statements
Have you heard of any profitable company that is not keeping a record of its expenditure and income? Would you care to invest in such a company? Then what is the probability that you will improve your financial well-being without keeping your books aka personal financial statements? Think about it.
Vijay L demonstrates how one can start from scratch on this good habit that makes budgeting a thing of the past. Yes, you heard it right! You would no longer find the need to make monthly budgets after maintaining your personal financial statements. This is because budgets are estimates but spendings are real. Once you have real data of the past months and years, why would you need estimates?
Accumulating the right assets
This is a little tricky part because this is a subjective topic depending on your personality and interests. But there is a way to know your natural strengths and inclinations, which serve you the best opportunity to improvise and excel in your chosen dimension. Ultimately, the asset should generate returns (passive income) that beat inflation by few points.
“Most people think that passive income is getting easy money for not having to work,” Vijay L says “That is simply not true”.
The effort required upfront is indeed high but gradually reduces with time and experience. Whereas the income is low at the beginning but significantly increases with time and experience. Call it a relationship between effort and reward with time as a constant companion on your side!
If you want to get good with money and never slip again in its management, then do give You, Money, and Family a read.
Danis Woods in Businessman, investment banker and stock exchange traders. On the same time he loves writing financial blogs to shed lights on different aspects that new and existing businessman are not aware of.