Is trouble having your cash flow under control? Here’s a simpler solution
Do you think you can have a controlled life with a cash flow that is out of your control?
I don’t think any of us could.
Having no control over your cash flow is nothing different from flying kite with no strings attached to it.
So, what about your money with no control? It’s just more of a dripping pot than your cash reserve.
“Too many people spend money they earned… to buy things they don’t want… to impress people that they don’t like.” –Will Rogers
It’s very common to lose control over one’s cash flow considering all the factors affecting today’s complicated lifestyle. Since we live within a social construct, it is always expected to live up to a few standards.
Hence, we end up losing our control over our cash flow to social validation, peer pressure, corporal advertising traps, and temptation to spend on futile possessions.
Table of Contents:
- What leads to your cash flow being out of control?
- Failing to address this issue can make you suffer in multiple ways,like:
- Are you a role model or a warning signal?
- Time for the results…
- You can become a role model from a warning signal
- Say hello to your look alike…
- Solution: Label your accounts
What leads to your cash flow being out of control?
1. Unplanned spending
How does it feel to compromise your kids’ education despite earning good cash due to your lavish and unplanned spending?
The parent guilt never really allows you to have a peaceful sleep, isn’t it?
Then you would certainly understand going around occasions with no financial plan is an obvious warning. Having no budget plan means pushing yourself to spend more than your actual need.
Like, going for a trip is your plan. But what about the financial plan during your trip? This is a matter of concern.
2. Unexpected spending
Imagine you are in a well-settled high-paying job with all your future financial plans altered according to your needs, sound relieving? Yes, it does.
But if you soon encounter a fatal road accident and end up having nothing as you would have pooled in every penny of yours for the hospital bills.
Whether you plan your every step in your future or just take life as it comes, ultimately, life always has something unanticipated to offer you. And these sudden offers may come up with huge financial needs too.
In such situations, you never know when a huge chunk of cash may slip away right in front of your eyes.
3. The tedious process of expenditure tracking.
The lengthy traditional process of tracking down every expense on your pen and paper is a complete turn-off. Yes, you aren’t alone in this.
Though there are application software’s being developed to help you with this, they aren’t helping much. All the painful and time-consuming operation is almost impractical.
So, aren’t we all in need of a simpler way out? And hence, we believe complicated spending needs a smarter solution.
What’s stopping us from solving this issue?
- Spending habit; the more in a savings account, the more you tend to spend
- Not having enough clarity on the amount of inflow and outflow of your cash
- Having no time to undergo the whole complicated tracking process; in need of a simpler solution
Failing to address this issue can make you suffer in multiple ways, like:
“A cash flow without control is like having a boat without a rudder” -Thomas Carlyle
How many of us can even imagine ourselves floating on a boat in the centre of the ocean with absolutely no idea about the directions?
This is how it exactly feels with having your cash flow is to remain without control.
Failing to address this issue could lead to having a serious impact on your financial and mental state.
These are a few of them:
1. Physiological pressure
Is your child’s birthday around the corner? But you are unable to buy that one beautiful birthday dress your child asked for…
How does it feel to not gift your loved ones on their special occasion?
Though relations aren’t supposed to be based on money, it does hurt deep and sparks mental pressure on you. This would be your daily life if you fail to have sound control over your cash flow.
Paying your bills, managing your kids’ education, marriage and other major life goals without a proper cash flow will surely bring you a heavy physiological imbalance in the family.
This would further lead to repelling of relationships and will hurt the children. A family with almost no cash flow is just a call away from breaking apart.
2. Additional loans
What’s your only option left when you realize there’s no cash with you but a list of emergency expenses due?
Yes, mortgage our gold and property documents for cash. Of course, you would plan to recover them once everything’s back to normal.
But on what certainty do you hope things will get back to normal?
Getting yourself additional credits to pay your daily expenses is like a never-ending dark hole, it just goes on until infinity.
3. Lacking attention to major life goals
Your cash flow which is out of control makes you vulnerable to stick around your unstable money life and consumes almost all your time to clear the debt.
Will you be able to dream about building a home when you got to clear your monthly EMIs?
Will you get to spend a few peaceful moments with your family, without the thought of your money life?
Certainly, we can’t.
This results in a major shift of attention leading to complicated and delayed life goals.
Are you a role model or a warning signal?
Take up this little self-evaluation exercise to discover more about your own financial life.
Raise your hands if,
- You don’t have enough clarity about all the actions with your cash reserve
- You have no more credit access
- Your expenditure list is mostly negotiable, but you still end up spending on them
- You don’t have enough liquid cash during an emergency
- After all your years of working in a high paying job, you still have to compromise on your essentials…i.e.: proper education and health
Time for the results…
If you have raised your hands for none, then congrats you are a Role model. Because you are doing a great job with your finances and should keep up the good work.
If you raised your hands for all the above points, then you are in actual danger and this is your warning sign to check on your money life.
You can become a role model from a warning signal
It’s completely all right if your self-evaluation results are not so pleasing. There’s always a chance to make it better and hence, this is your chance.
“Never give up because great things take time.”
We can now agree that cash flow management is quite a task in real life, isn’t it?
It doesn’t feel as fancy as it appears to be. An uncontrolled cash flow can take a toll on almost everything in your life and leaves you completely insecure.
Right from having no funds for an emergency, ruining happiness in your family to having almost no mental peace and what not?
Say hello to your look alike…
The source of most money problems arising in cash flow is due to confusion and lack of clarity with your own money.
I once met one of my old friends, Manika, a few years back. She was a techie and was doing great in her career. Being in a high-paying job, I thought she would be well off with her luxurious life and expensive possessions. But to my shock, she wasn’t appearing to be in the one.
She said, “I just live a hand-to-mouth life. I have no idea where all my cash goes. Neither I have proper savings nor do I have an emergency fund out of my salary.”
Curious to know more about her lifestyle and where all her money goes, I asked her to go on it further. “It’s the rent to my posh apartment and all the EMIs to my furniture. Apart from these, family outings once or twice a month will cost huge for us”, said Manika.
She could barely save few thousand each month and not so surprisingly, spends the next month to make ends meet.
I am sure many of us could relate to Manika’s situation. That’s because we all would have been there at least once in our time. And it’s absolutely fine to continue to live in that situation.
What if I said you could get away from these tiring money problems forever with this fundamental procedure?
Yes, you read that right and here we go.
Here’s a brief answer to all your uncontrolled cash flow worries.
Solution: Label your accounts
Dealing with all your cash being deposited in a single account will make things complicated and lead you to have more confusion.
To get these confusions out of hand, it’s always better to split your money based on these three categories:
- Money inflow
Now, deposit all your money into three different accounts and label them all.
Labeling your money account may seem a little weird. But trust me, this would certainly help you to a great extent.
Because, after all, we don’t exploit an identity, do we?
This would further lead you to differentiate between your savings and expenditures and make you have a better idea of your expenses.
Steps to be implemented
1. Make sure you have an expenditure list prepared before your salary gets credited into your account.
2. Add every expense to it..,i.e. rents, EMIs, groceries, current bills, furniture, travelling expenses, and whatever makes up to this list according to your need.
3. Remember, this is the only segregated cash amount allotted for your expense for a month by yourself. So make sure you don’t end up adding more spending.
4. But in need, you may add 10-15 percent more than what your expenditure list demands.
5. After your income gets credited to your income account, split your money based on your expenditure list.
6. How much ever your expenses demand, transfer that cash to your expenditure account.
7. Now, transfer the remaining amount to your savings account. You may leave a certain amount of cash in your income account if you want to.
8. All your unexpected cash inflow from various sources like bonuses, cash prizes, etc. must fall into the income account.
Repeat the same procedure with your money for the next three months and observe your money movement.
By the end of these three months, you would be well aware and confident of your cash pattern. Now analyse your needs.
Was the money in the expenditure account too little or too much for you?
Observe your accounts back to back every month. This will project a better image of your cash flow and help you regularise your needs.
Yes, I suggested these same steps to Manika on the very same day I met her and she too followed them for about three months.
Now, She’s is great with handling her cash and is also able to save more than expected. Her money life is starting to get a peek. She’s able to pay her rent, EMIs, and other expenses in a smooth and regularised manner.
Manika felt that she could track her expenses easily from the Savings account designated for expenses. This was so easy, not time-consuming and had no record keeping. She got clarity about how much income the family makes and where this money goes.
So, what are you waiting for?
“Controlling your cash flow is the first step in progressing your financial life.”
What more can one expect than a controlled financial life?
Implementing these above steps would make you feel easier to deal with your cash flow without any confusion and temptations. This would further lead to achieving your financial goals in a much effective manner.
If you have any comments or questions, write them in the comment box below.
Or are you interested in creating a Comprehensive Financial Plan for your financial goals?
Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below.