Wednesday, September 16, 2009

Understanding Personal Cash Flow

Do you always run out of money right before you get paid? Are you constantly broke from overwhelming bills? It's because as Americans we stereotypically live just outside our means. We tend to want things that we can't afford, and are willing to spend every last penny trying to get them.

Despite what you may think, a raise in salary won't solve your money problems. If you made more money, you would just spend more money. In order to improve your situation, you must first understand the fundamental principles cash flow .

Cash Flow
Cash Flow is the difference between how much money you make vs how much money you spend. Improving your Cash flow is the key to solving your financial all problems:

  • (+) A positive Cash flow occurs if you are diligent enough to set aside portions of money in a savings account.

  • (0) If you spend every last penny of your paycheck, and are unable to save, than you have a Zero Cash Flow.

  • (-) If you spend more than you make, and your credit card debt is growing, than you have a negative cash flow.

The best way to improve cash flow is by budgeting. Make a practical budget and stick to it. Consider using a budgeting tool like my Ginzu Paycheck Slicer to help plan and organize your spending habits. By defining your expenditures, it will help you to track and isolate the problematic areas.

Make a decision right now to regularly set aside and save a certain portion of money as soon as you get paid. By setting aside this money for savings you are less likely to spend it, and it will force you to exist on a lower income level. Saving money from every paycheck and not touching requires disicpline but is crucial to generating a positive cash flow. Many experts recomend saving a minimum of 10% of your income.

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