Forming your new cash flow habit

Forming your new spending habit – Solidify your cash flow

If you are a running your business, obviously you won’t let your business go bankrupt by making poor decisions, spending more than you earn. Likewise in managing your personal cash flow, be proactive to solidify your wealth to ensure strong financial security.

Here are some cash flow habits to help you get started.

• Pay yourself first

  One of the most important aspects of cash flow management is having the discipline to pay yourself a set amount for savings. Remember, all bills, loan payments are money you earned to pay others. So, why aren’t you pay yourself after whole month of hard work?

• Use credit cards wisely

  Credit cards are a seemingly easy solution to cash flow problems but they should not be used as a long term solution to your income gap.

  Credit cards should not be used as excessive spending, but rather as a means of delaying cash payments slightly so you can still hold cash to your advantage. Purchases must therefore be properly planned so you can make payments in full when payments are due.

  If you still cannot resist the temptation of spending, use Debit card instead.

• Pay more than the minimum amount on credit card bills

  When you owe money or have outstanding amount on credit card, you attract high interest charge. Late fees, if you should pay late, are going to cost you more. Avoid late fees by paying on time, will get you better credit card interest rates. Always pay more than the minimum to be able to reduce bills faster and pay less in interest.

• Create a debt reduction plan

  One of the reasons your cash flow is tight could be due to debt repayments. By managing your debts, you free up more of your hard-earned money. Paying off high interest rate debt first is the best strategy to work on. In low interest rate environment, refinance high interest credit card loan with a lower rate personal loan may allow you to pay down debt faster.

• Compare & reduce your spending

  Whenever you need to make a special purchase, compare prices different outlets and be sure to take the time to get those special sales deals. You can often find great deals on those things you need and save money. Use product coupons are another excellent way to get discounts too. Buying secondhand items is another way to increase your cash flows.

  Look at all your expenses and figure out where you can reduce or eliminate spending completely. Start with your non-essentials first, i.e. coffee money, movie,entertainment or clothing etc. Then move on to discretionary expenses, like groceries and transportation costs.

• Start a general accumulation savings account

  There are many good reasons why having a general accumulation savings account is a good idea.
  The money in the savings account can be used for various purpose such as :
  • to hedge against financial risks for ourselves and our family
  • to provide for life events such as the marriage of your child
  • to provide as downpayment for a new house purchase
  • to provide for long term care or even ;
  • to pass on wealth to next generation.

  Treat this general accumulation saving account seriously. Save regularly and systematically. Make sure this account has “forced saving” feature without easy withdrawal flexibility.

• Find ways to increase income

  In order to improve your cash flow is to increase your income. You can take on second job, get a raise or start a freelancing business. Obviously this always results in working longer hours. You also need to consider the time factor and the potential income your new venture can bring in.

• Seek advice

  There are many financial services professionals who can help you to get and stay on track towards achieving your financial goals. You can speak to them and choose one who you feel comfortable and are able to give you the specific advice you require.