How to manage your cash flow

 How to manage your cash flow

The How to manage your cash flow

The concept of personal cash flow management is to ensure the efficient use of available funds to maximize profitability. Managing your fund effectively can help you build wealth over time and protect it from financial failures. By directing the movement of your funds to assets rather than wills, you are taking direct steps toward financial freedom that gives you time, control, and choice.

Managing your fund effectively can help you build wealth over time and protect it from financial failures. Cash flow is the movement of cash and its equivalent, out of a business or to an individual, over a period of time. The whole idea of personal cash flow management is to channel the movement of your money to earn more profit.

Here are the basic steps to effectively manage personal cash flow:

1. Estimation of personal cash flow

A personal cash flow assessment will help you make deliberate and realistic decisions about how to channel your money, list your income sources in detail (cash flow), and how your money is released (cash flow).

The difference between your flow and your output is your net cash flow. The difference will result in a positive or negative net cash flow. A positive net cash flow means that you have been careful in your cash management, while a negative net cash flow indicates unhealthy wealth management.

2. Actual budget

A well-managed budget is the first step to effective personal cash flow. To create an effective budget, calculate your total income, list all of your expenses, and then deduct the expenses from your total income. Also, set a fixed amount for the investment.

There are many types of expenses.   The two primary ones have settled costs and variable costs. Fixed expenses are mainly the payments you have to make such as rent. Fixed expenses are approximate; This means that there are times when such payments are made.

The second type of expense is a variable expense which can also be defined as a discretionary expense. Variable expenses are not estimated as a fixed cost. Variable expenses are costs that change frequently based on volume or usage; Groceries, gas, food are examples of variable expenses.

3. Savings and investment

Savings is the amount you set aside for future use, which doesn't necessarily earn interest overtime or earn less interest. However, investing means setting aside a certain amount (principal) or its equivalent in anticipation of a particular benefit (interest) in the future.

Your monthly budget should include a certain percentage of investment. You can use an online savings platform to automate your savings and/or investments.

4. Practice a thrifty life

Living frugally is not the same as being cheap, in fact, it helps you channel your spending on the most important things. By being careful with your money, you can still purchase items of the required quality. Managing your cash flow will tell you how financially free you will be in the long run.

How you manage your cash flow is a big part of how financially free you will be in the long run. At OVER WOOD, we are primarily committed to helping you achieve your financial independence by investing your funds in secure, high-yielding IT technology assets.