Wealth Tip: Know Your Cash Flow

Posted by Jana Groscost Matthews | Filed under Healthy, Wealthy & Wise Tips

Wealth tip: Know your cash flow! Wealthy people are very aware of all aspects of their money. They spend with awareness.

1) Look at your spending habits for a 3 to 6 month period. Categorize your spending by living expenses, utilities, insurance, car expense, car loans, credit card payments (break down by each credit card), school, insurance expenses, clothing, kids expenses, entertainment, food, child care, and anything else you want to summarize it into.

Get the information from your bank and credit card statements, and any other sources. If you pay for car insurance bi-annually, make sure you include the pro rata portion for each month so you see the full effect of your cash flow. Create a spreadsheet showing having the months as the columns and the rows be the categories. This way you can see the fluctuation in cash flow for the specific categories.

2) Understanding where your money goes, helps you begin to make more conscious choices about spending, saving, paying off debt, and investing it. Are you spending from an emotional perspective to make yourself feel better about yourself or your life? Do you have thoughts such as, “I had a bad day so I’m going to buy “this” so I feel better.”

3) Take the emotion out of your spending. Once the emotion is gone, you can freely spend based upon your budget. If you have a budget, then stop feeling guilty or ashamed for spending money – especially on yourself! If it’s in the budget then spend it.

4) Develop a budget. I know for many people the word budget is similar to diet. People often see a budget as being “restrictive.” But actually a budget gives you the freedom to spend. When I worked as a Budget Analyst I knew exactly where every penny was going, so when someone came to me for a request for money, it was in the budget and the request was granted. It took any emotion out of the equation. For example, if you have a budget of $300 a month for clothes and you used to feel guilty for buying something for yourself, now you can buy with confidence because you’ve given yourself permission to spend a certain amount of money for yourself.

5) Find areas of your spending where you can make changes. When you understand where your money is going, you can consciously decide how to change your habits. Perhaps you go out to coffee, snacks, or meals every day. Can you bring something to the office a couple of days a week instead of going out? Where can you cut back your spending so you can pay off debt and invest, so you’re making your money work for you!

6) Pay off debt! Use the extra money you’ve trimmed from your spending to pay off debt. (More tips about paying off debt in future posts)

7) Invest. Wealthy people make money work for them instead of them working for money. (More tips about investing in future posts)

Money is a very emotional issue for many people. Until people harness their emotions related to it, it is difficult to attract more of it to them. Knowing your cash flow is a start in understanding how your money is being spent. Then shift your spending habits so your consciously spending instead of emotionally spending. Through this process you can learn to manage money instead of chasing it. You can learn how to learn to employ money instead of you working for it. And that’s what wealthy people do, they learn to make money work for them by generating passive income streams.

Permalink | January 23rd, 2010

One Response to “Wealth Tip: Know Your Cash Flow”

  1. Jessica Eleven Says:
    January 23rd, 2010 at 2:48 am

    AWESOME post Jana! Ever since I started doing the New Moon Manifesting I decided to take FULL responsibility for my finances, spending and earning/ making. It’s a very ‘freeing’ experience indeed! And I’ve noticed a HUGE difference in my spending AND saving habits. For the first time in YEARS I’ve diligently been saving and repaying!!
    And you’re totally right about having a budget.. it really doesnt make sense/ feel good until you try it!! And it totally works.

    Can’t wait to read your future posts related to finances and wealth! It’s a genius focus :D Brilliant!!

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