If you feel successful at what you do with your money, there are two parameters that count more than others - New Worth and Cash Flow. Although it may seem obvious to measure how much you are worth in dollars (Your Net Worth), look at your financial situation can be frustrating if you do not know the cash flow.
The cash flow of personal finances is often misunderstood. You must listen to these lines: "Oh, yes, I have a lot of cash flow - all out!" or "Do you wantSee Cash Flow? Watch me go shopping. "
Cash flow is the rate at which to spend money. Rather it is to compare the money in cash that you can get out. In a simple sense, is the income minus payments for a period of time. If personal income is $ 4,000 for a month and spend $ 3,000, $ 1,000, you have a positive cash flow. On the other hand, if personal income, the same $ 4,000 and $ 4,500 you spend, you have a $ 500 cash flow negative. Apositive cash flow is good and the unconditional ability to pay. A negative cash flow is a bad thing. You can not go on month after month, with a negative cash flow. This path leads to a world of debt.
After hearing the news on our economy in recent years we have all learned to fear debt. Some of us have quickly learned fear "spend." And we have many articles on how frugal life that we have read on overload or loss. You can use the concept of CashFlow (CF) to manage your expenses without feeding your fears. Here's how it works:
If you have a CF positive, you're going in the right direction. This does not necessarily mean that you have enough positive cash flow. If you figure your monthly CF, and pursuing, you have a good incentive to keep going in the right direction! You should build a CF to pay to take at least 15% of your house is. If you have $ 4,000 in net wages are, you want a $ 600 per month CF positive,To use to pay the debt or save for retirement and lessons for children.
If (as the holiday buying, furniture, cars, etc.) money in a savings account for the spending plans, you should count the money spent, as if in a savings account. The reason for this is that you actually plan to spend the money. If you deduct the money if you actually spent in waiting, there were a lot more about how to be your CF for the figureMonth. Although the CF calculation are already thinking about saving the money spent for a special event, you still have the money sitting in savings and can be considered as part of the emergency fund. If you need a new right for your vacation pay to cover an emergency situation, is there and you can use it.
Whenever something of punishment on your credit card, it is money. CF And you include these credit operations costs if your calculation. But - andthis is important - if a payment on your credit card debt, you are not spending. This situation is a matter of timing. The purchase of credits is a measure of costs if the purchase is made, there is no need to put back if you plan to pay the credit card account.
Interest paid on credit card balance to spend, it is necessary to calculate the CF. To avoid paying interest and increase the CF, you should pay their debts.
In your efforts toNudge measures the CF to more positive numbers, you can avoid spending. However, not all spending is bad. With the monitoring of cash flow, you actually know when the money without guilt.
The number of CF can be improved if you bring in more money. This means that you can improve with a second job or selling things you no longer need. How long will you be able to work two jobs? How much "stuff" you have to sell? Reducing spending is a convenient way toImprove your cash flow. This may seem like we're back again to get frugal life, but the difference is that we ask a different question. Instead of asking, "How do I pay for this?" We ask: "How much can I afford to pay them?" This is a huge difference between what we see with our money behaviors. If you know what your monthly cash flow, you know how much additional debt that can be in the form of a monthly mortgage payment or car.
Aftercalculate the cash flow for a few months, you start to see what you can do to improve that number. More importantly, you gain the confidence that you know what you do with your money. The foundations remain, as always: Do you have an emergency fund. Do not spend more than you. Pay your credit card bill in full each month. Saving for the future, because if you earn money. Monitor cash flow a month you will receive a personal measure of how well you are followingthese principles, and how much you can afford.
0 comments:
Post a Comment