By Tisha Kulak Tolar
You may have heard the term "cash flow" most often when talking about business financial matters but cash flow is also a personal finance matter. Cash flow is a necessity in conjunction with your personal budget. To have an adequate understanding of the importance and the point of cash flow is necessary in order for your personal budget to work for you.
Cash flow is essentially the money that flows in and out of your checking and savings accounts. If you are able to say that you have not bounced a check, haven't needed to tale a loan to meet your financial needs, or have not used a credit card to pay for the basics, then you can probably also say you know how to properly manage your cash flow. Cash flow is the term used to describe the availability of money when you need it, or not having enough cash flow is the lack of cash when needed!
As more and more people are creating budgets to stay on track in a turbulent economy, it is important for those people to recognize their own cash flow situation and deal with it. Even if, on paper, your income meets your needs for paying bills, you still may not be off the hook. You'd be surprised at how easily you can work out your finances on paper or in a budgeting program, only to find that when it comes down to pay the bills or withdraw cash - the "cash flow" isn't there.
If you get paid two times a month, but all of your bills are due at the beginning of the month, you may find that your struggle to make the ends meet in the middle of the month, after you have paid all of your bills. You have a cash flow problem - the money isn't coming in when you need it, and if you aren't extremely careful about what you do with the money as it comes in, you will experience problems mid-month in this scenario.
You still have to wait till the next payday to once again have cash on hand. Along with your budget, you need to learn how to forecast your figures each month to ensure that you have a buffer to meet unexpected expenses during the time you are normally short on cash. You have to change some of your payment due dates on your accounts, provided you are able and you don't have to pay an extra fee to do so.
If you are capable of living a little beyond the paycheck-to-paycheck scenario, it may be wise to always keep about 2-3% of your gross annual income on hand that can act as a buffer during the times in between paychecks you find you are running short. This money can also operate like an emergency fund, by providing you cash during the times of unexpected expenses, like home or vehicle repairs, without having to rely on using your credit cards.
Working on establishing a solid budget for your family is important to your financial future and forecasting the amount of cash you have available each day is important to your present financial situation. Take the time to always account for your money and it will make it that much easier to never go over budget. This way you will always feel ahead of the game and can stop worry each day if all of your checks will clear and whether or not you can afford to pick up milk and bread at the store.
Tisha Kulak Tolar is a writer for DebtFreeDestiny.com where she regularly writes about debt consolidation, debt settlement and saving money.
Source:www.isnare.com |
