For the first piece of practical piece of financial advice, I’m telling everyone to take a close look at their monthly cash flow. For the sake of this post, cash flow will be defined as the cash you bring in from your job, business, and investments less your cash expenditures, debt repayment, and money set aside for investment purposes. I am providing a link to an online calculator, but it doesn’t need to be that complicated. A simple excel sheet will do.
Please don’t confuse this for a budget where you categorize how much you are allowed to spend in a long list of categories. I am a strong disbeliever in budgeting because as long as I’m cash flow positive, I don’t care how much I spent on gas or food. In many categories, there’s not much I can do to materially change those things any ways, especially gas.
Positive cash flow is the air that your household finances breathes. A lot of other finance blogs always jump on debt repayment first because it’s easy to demonize debt, but if that puts you into negative cash flow position, you’ll never be able to get ahead any ways. I agree that debt optimization is important, and it is definitely something I will post about at a later date.
If your monthly cash flow is positive, good job! You’re good for now, and I hope you’ll stick with me moving forward as I talk about how you can be in an even better situation through investing, side hustles, debt optimization etc.
If your monthly cash flow is negative, then you will have to take a long look at areas where you can improve the situation. Some of the things you can consider is taking a second job/side hustle (Uber, selling on Amazon etc), cutting non essential expenses (Netflix, Amazon Prime etc.), a debt consolidation loan, and stop saving for long term goals such as retirement. There are also one time things you can do such as selling things around your home that you don’t need for some extra money.
Final Thoughts: As someone who runs the family household finances, I can tell you that cash flow is my #1 priority. My cash flow statement is very basic, but it goes out at least 12 months so I can see if and when I need to move money around to make sure money will be there when it is needed. Because I get into the habit of doing this, I have never once went to bed worrying about money. I would love to know some of the things you guys do to ensure you remain cash flow positive. Feel free to reach out to me in the comment section or any of the other ways below.
Have a Great Day!
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