Placing a water fountain at the entrance of my home might not make me rich, but the feng shui "money cure" reminds me of the importance of cash flow. To get my personal cash flow moving again, I took a hard look at my income, fixed expenses, discretionary expenses, savings and investments. After spending 10 years saving money and paying off my credit card debt, I was ready to improve my cash flow. Having a better cash flow means we can enjoy life by spending more at times and putting money aside as well. I used the Yahoo cash flow calculator to get some ideas for how I could reduce expenses.
According to a recent article by Modest Money, cash flow forecasting is an early warning system that helps people spot potential money shortfalls.
Boosting our income
My first task was to figure out how we could boost our household income. We thought about how we could earn bonuses and raises. Since the company I work for gave employees pay cuts and furloughs, I looked at passive income streams such as owning stocks that pay dividends.
Changing our fixed expenses
One of the most significant changes we made was with our fixed expenses. We lowered the cost of our cable bill by $50 a month. We also refinanced our home, saving $300 a month. Since our interest rate is only 2.75 percent, I am not motivated to pay off our house early. Instead, we can enjoy the extra cash flow every month. We had a number of other fixed expenses that we can't change such as a payment of $300 for our car. We also pay $400 a year for our homeowner's association fees.
Looking at discretionary spending
I liked examining our discretionary purchases because we have total control over those choices. Plugging in the numbers gave me a chance to see how much money we waste. I also realized we have a lot of expenses that I sometimes forget to include in our budget. I used the cash flow calculator to help me re-figure our monthly budget.
Tracking, observing and controlling
After using the cash flow calculator, I decided to start tracking, observing and controlling our cash flow every month. We realized we could be maxing out our contributions to our Roth IRA accounts. We could also spend more money on our favorite hobbies by spending less on lower priority expenses such as gourmet coffees and clothes.
In the end, I realized managing my cash flow is not just about making sure we are staying in the black by having positive net income, as much as it's about having enough to enjoy life now and in the future. We need to make enough income so we can live comfortably while saving up for our retirement. Now that I have a better grasp of what's coming in and what's going out, I can sleep better at night knowing our finances are on fire in a good way.
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