How do you manage your cash flow?
One of the best things you can do for your finances is to look at your cash flow. Understanding the way money moves through your own personal financial system is important. If you can manage your cash flow, it can give you an idea of how much money you have, and when you will have it. This is very important if you want to make sure that you are able to make payments on time, and ensure that you have enough money in your account for the things you want.
WHEN is your money in place?
Many people, when looking at cash flow, just figure out how much they have coming in each month, and then what their expenses are. This is good information to have, but it doesn’t give you the complete picture. If you really want to understand your cash flow, you need to know when your money is in place.
Don’t just total up income and expenses. Pay attention to when your money is in your account. When do you receive your direct deposit? When are your bills due? When are your bills deducted from your account using automatic debit? Also, pay attention to how long it takes a transaction to go through. If you are transferring money from one account to another in a different bank, it can take three to four business days for the money to arrive.
Keeping this timing in mind can help you avoid fees. If you have a bill coming out on the 15th of the month, but your direct deposit from work won’t come until the 18th, you might want to move some money from one account to another. However, the transfer might take as long as four days. If you don’t start the transfer by the 11th, the money might not make it on time — and if your account is overdrawn you will be charged a fee.
As you set up your bill schedule, take into account when you are paid each month. It makes sense to divide up your bills along with your paycheque. One strategy is to try to arrange matters so that you pay half your bills after receiving your first direct deposit of the month, and so that the other half of your expenses are paid after you receive your second direct deposit.
Your cash flow is about more than just acknowledging how much money is coming in, and what obligations you need to meet with it. It’s important that you pay attention to other aspects of your financial situation, and that you take steps to ensure that everything moves as smoothly as possible through your financial system.
Understanding all aspects of your cash flow can help you make better decisions, and ensure that everything moves more smoothly. Take the time to really look at the way your money is moving through your various bank accounts. Know where it is coming from, and where it is going. And don’t forget to take note of when all this is happening.