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Cash Flow Planning

Cash Flow management is a fundamental part of personal financial planning.  Cash Flow Management for personal financial planning is a system and shouldn't be treated as a budget.  It allows you to monitor your financial standing from a long-term, organized outlook.  Its is very important to start a savings and investment plan to accomplish the retirement and financial goals that you may have.

Cash Management Goal Setting:

  • Eliminating Negative Cash Flow.
  • Scheduling Major Cash Commitments and projection of cash flow for the next three to five years.
  • Evaluating debt level.
  • Identifying expenditures that can be redirected toward financial goals.
  • Establishing budgetary control over expenditures.
  • Increasing discretionary income as a percentage of gross income.
  • Expanding standard of living.
  • Increasing amount available for savings and investment.

What is the importance of having Goals?

When goals are set, whether they be long-term or short-term, a cash flow plan functions at its best.  Whether a large purchase or maybe a decision to remodel part of your home should always influence your cash flow plans.

Goals that you set for yourself will help to shape your vision in creating a cash flow that you understand and can follow with ease. And as you achieve these goals you will make a system that is most effective for you.

What should your system contain?

The four main factors that should be included in your system are; Income/Expense, Category, Time, and Amount. Income/Expense would be used to identify and isolate income and disbursements, and you should consider whether income is gross or net, which is the amount you actually have available.  Category can define the kinds of income you receive and the types of expenses that you acquire.  You need to categorize them according to a fixed or flexible nature of the item.  Time is  a very important factor in maintaining a system because you should always quantify your income and expenses within a 12-month format and should be based on a monthly structure.  Lastly, Amount is important because this is what allows you identify your income and expenses in dollars.

Saving and Planning

It is very important to assign a portion of each paycheck for your savings and investment program, you should consider it an obligation rather than an option.  Make saving just as important as any other monthly obligation.  Tax planning should be implemented as well so that you may be prepared for the following year ahead of time.  This will also give you an additional source of investment funds as well as also reducing income tax liability on a regular basis.

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