Cash flow management, managing what’s coming in and what’s going out, is critical to maintaining control of your spending and staying in financial balance. Some people manage it to extreme detail and others manage it up to the high level. Either way, its cash flow management and it’s our jobs as wise money managers to exercise it often.
Reflecting back on what I’ve seen work well; I thought I’d share some cash flow management tips that can make all the difference in the world to living within your means and making progress, month by month, towards your financial goals.
- It’s a daily exercise. Performing good cash flow management and staying in financial shape requires a daily exercise routine. Not matter how you track money going out, coming in and balancing each expense with your checking account, you need to find time to do it daily. The daily exercise just takes a few minutes to review receipts and either writing the amounts in your tracking form, or inputting into your personal finance software. If you’re tracking manually you can capture your expenses at the point of sale.
- You need to know where you’re at today. At any point in time, you should no how much money is in your account and be able to quickly determine how much money is left for each spending category. How do you have this information at your finger tips? If you track manually, you can keep the balances in a pocket book. If online, you can view category balances through mobile interfaces (or on via the web) available with most major applications. Either way, you can quickly determine how much money is left in the grocery category.
- Determine what works best for you. There are a lot of cash flow management tools. I’ve had experience using software and paper tracking forms. Software can save time, but there is something about tracking money by writing it down that allows you intimacy with your financial situation. I once had someone tell me they felt like they were on a Weight Watchers diet when writing down expenses manually. The more they had to write down their expenses the less they wanted to spend. The point is to find what works best for you and implement the tool into your routine.
- You can’t guess your way through it. Don’t try to keep track of your spending decisions or actual expenses in your head. I don’t know anyone that can successfully do this for their entire budget. Don’t try. You’ll eventually make a mistake or never really be able to determine where your money is going each month. Trying to manage in your head or via the summary balance in online banking won’t give you the measuring stick needed against a monthly spending plan.
- It’s typically an eye opening experience. If you’re convinced you need to track your spending, you can save money. It’s easy to go back at the end of the month and add up all the times you went out to eat or determine how much you’ve spent on cable TV in the last year. Having this information will enlighten you to your spending habits. And some of your spending habits may frighten you once you can go back and look at them. Cash flow management provides a great opportunity to curtail careless spending and keep discretionary spending under control.
- It’s a routine thing. If you’ve ever gotten into the habit of a regular exercise routine you’ll appreciate where I’m coming from with this one. Once you’re in a regular routine and miss a day or two, you feel empty. You feel like you’ve lost something that you have to gain back by getting into the gym again. When you manage your money, it’s the same feeling. Eventually, it will become natural and if you skip a day of managing your expenses or don’t plan your spending for the next month, you’ll feel like you’re getting out of financial shape.
- It requires commitment. I think it’s too easy to say “I need to start tracking my money or managing spending better”, but too many times people talk about it and don’t do anything about it. You have to be about it! There is a reason why people who commit to managing their money avoid debt. As a money coach, I’ve never worked with anyone who was diligent and committed to their finances and kept spending carelessly. The two just don’t go together. If we’re committed to managing our money, we are also typically committed to spending wisely and using a spending plan.
- Closing Thought – It’s not easy, but everyone can do it. As with most things in life that have big reward and pay off, it’s not easy. We can all add and subtract. That’s easy and the fundamental skill required. However, what’s not easy sometimes is going a little bit outside the norm.
I’m willing to bet the majority of the population doesn’t read 15 minutes a day. I don’t have any solid facts; it’s just a theory. If you’ll roll with my theory I think you would find reading 15 minutes a day would put you well in advance of the average in terms of information and knowledge you posses.
And so goes the same, in my opinion, with cash flow management. Why not do an out of the norm thing and practice just 15 minutes of managing your money each day? My theory, if you choose to believe it, will bring your finances in order, balance, and onto the path of debt free day.
What’ the best way you’ve found to manage what’s coming in and what’s going out?
Cash flow management, for me, has become a regular thing. I look at when everything is due, and I have the bills automatically deducted from my account, and entered into my personal finance software, regularly, and on a schedule that matches up when I have cash inflows. It’s a good system.
Jason @ One Money Design says
Miranda, thanks for your comment. It sounds like you have your process down quite well. Overall time investment is limited with some of the automation you speak of and also the daily committment.
Financial Samurai says
I think what you need to do is employ our “Going Broke To Win Big” strategy and live on razor thin cashflow. That way, you are forced to understand where all your money is going every day, instead of fluffing it off b/c you have a nice buffer.
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Branden @ FaithFitnessFinance says
One of the best parts of modern cash flow management is the atomization available through programs like Quicken, Microsoft Money, or even mint.com. With how easy it is to track your expenses and expenditures nowadays, I can’t think of a good reason not to do it. The more I read and learn and the longer I live, the more important I find it to know where every spent penny goes. If I could offer one piece of advice, don’t cheat. If you get paid for something in cash, don’t treat the cash as if it doesn’t count in your cash flow. If you’re not tracking everything, you are just going to miss something.
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Jason @ One Money Design says
Great advice Branden! “If you’re not tracking everything, you are just going to miss something.”
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Becky Rivera says
thanks so much for your blog. I really enjoy it and check for new posts daily. I have an amazing money testimony as well (from your last guest post.) I am single mom with two boys. I homeschool and only work part time. I have no debt and am about to buy a house with 15% down. It is all God. He is so amazing!
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I’d love to host your debt free testimony as well! send me an email through the contact page!
i always thought that this extremist money management style was a little over the top but after reading though the whole post, i think i see your point. i am making a point to start this good money management habits when i am still young and mouldable(pun) before i get bad money habits that will imprison my finances for the rest of my natural life. i have seen the havoc that bad spending habits can wreak in one’s life and i am not about to head down that road
Jason @ One Money Design says
Keyantykoon, I’m so glad to hear you’re going to take some steps towards establishing some good money management habits now!
Becky, congrats! That sounds like an amazing story. I know that God can do anything and it’s especially important to let him into the financial area of our lives to let him do his good work their too!
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