Do you often wonder where all your money goes and find yourself under stress when facing unexpected bills? The best place to start is with your cash flow, as SHANE WEST explains.<\/p>\n
Healthy finances are important to families not only for their financial wellbeing but because it flows through every other aspect of life.<\/p>\n
Money woes are one of the biggest contributors to problems in the household.<\/p>\n
What if I told you it\u2019s not the money, or lack thereof, that causes these problems. It\u2019s the stress associated with it. Let me clarify what I mean.<\/p>\n
In our business, we have many couples come to us in a high state of stress. How that manifests is often eerily similar. There
\nis pressure on their relationship, nights are sleepless and the future is uncertain. Sadly, even their physical health and wellbeing has started to slip.<\/p>\n
However, the one thing that can widely vary between different couples is their levels of income. Some families have humble salaries and others make the kind of money most only dream of. The amount of money they earn isn\u2019t the source of the stress, nor would earning more necessarily solve it. A lack of management is the culprit.<\/p>\n
Some good news though. Taking care of this is relatively simple and well within the capability of most families.<\/p>\n
CASH FLOW NOT BUDGETS<\/strong> Many people think that good financial management centres around budgeting. It is true to say that setting limits is\u00a0 important. That is budgeting.<\/p>\n But budgets have connotations of restrictions and reducing your control. No-one wants to live their life like that and nor should they.<\/p>\n Cash flow, on the other hand, is about putting simple controls in place to understand what money you have coming in, and when; and what money you have got going out, and when.<\/p>\n When we have introduced this simple concept to couples like those I\u2019ve mentioned above, it has changed their lives.<\/p>\n MANAGING CASH FLOW<\/strong> Not only that, this little bit of understanding creates a platform for them to be in control, able to do the things they want, and even invest to get further ahead. Again, income isn\u2019t the defining factor.<\/p>\n To manage cash flow you will need some sort of a system to capture what your income is, what your likely costs are and when all of this will hit. This system could be as simple as a notepad in your kitchen drawer, through to an app on your phone or assistance from a financial planner.<\/p>\n The important part though, is that it\u2019s captured, understood and managed.<\/p>\n SPEND WHAT IS LEFT AFTER SAVING, NOT\u00a0<\/strong>SAVE WHAT IS LEFT AFTER SPENDING<\/strong> In a sense, that concept is just a hand-tomouth budget. To better manage your finances, Understanding what you are building in savings is important because it gives you the confidence to handle your future financial needs.<\/p>\n If you know and have planned for a significant bill that is coming down the line, such as your car rego, you will have it covered without a second thought. It\u2019s in the plan. Not only that, you will probably have planned for that family holiday that means so much.<\/p>\n Furthermore, having those savings built can very quickly eliminate the massive stresses associated with larger unexpected costs that rarely, but inevitably, do occur.<\/p>\n CHANGING HABITS TO GAIN\u00a0<\/strong>PEACE OF MIND<\/strong> The beauty of managing your cash flow is that you can make better decisions about the real value of the things you buy.<\/p>\n For example, on a shopping trip you come across a pair of sunglasses that you have to have. You haven\u2019t budgeted for them, but you know you can cover their cost regardless of what\u2019s ahead. They make you feel great.<\/p>\n Arguably, that was money well spent. The very same pair of sunglasses could be nothing but a source of anxiety if you are unsure of your future cash flow position. In this case, buying the sunnies was probably a bad financial decision.<\/p>\n
\nIt\u2019s hard to imagine less enticing words than cash flow and budgets, but hear me out on this one.<\/p>\n
\nPeople who understand this cash flow concept most often have lives that are free of financial stress.<\/p>\n
\nEveryone knows that you shouldn\u2019t spend more than you earn.<\/p>\n
\nyou should keep track of how much of your income is left after you have paid your bills and how much of it you intend to put into savings.<\/p>\n
\nYou will have noticed the catch. To have savings accumulated you\u2019ll have had to give some stuff up along the way. That sounds awfully like a budget. But it is different.<\/p>\n