Your money is constantly moving from one place to the next in a cycle of income, expenditures and investments. Your personal cash flow is described as being the difference between the amount of money you make compared to the amount of money you are spending. Research shows that 75% of Australian families will experience financial hardship at one point, and so it has now become essential that you manage your money wisely in the growing financial market.
One way to ensure your financial security is to save. By saving you have provided yourself with something to fall back on and still be able to support your family through hardship. You should ideally have enough money saved to support you and your family for two months just in case you lose your job or encounter some similar financial hardship. Some money saving tips are:
• Treat your savings as expenses when it comes to your budget
• Save your coins
• Don’t spend what you don’t have
• Always be faithful to your budget
• Have a dedicated account, not accessible by ATM, that you transfer a certain amount to each week or fortnight
• Consider consolidating any loans or debts into one loan
• Shop around for cheaper insurance, savings accounts with higher interest rates, always making sure that any exit or transfer fees won’t negate the benefits gained, or
• Consider transferring your credit balance to a low interest credit card.
Something that you should also refer to closely when considering personal cash flow is budgeting. Budgeting is a spending plan that lists what you will pay that month. A good budget includes details of everything you will spend along with money to go into savings. Some budgeting tips are:
• Give your budget a little flexibility
• Allow for ‘unexpected expenses’
• Try to include money rewards for incentive purposes
• Pay your bills on time, and by direct debit where possible to avoid late fees and finance charges
• Only shop when you have to. Always take a list, and avoid making purchases outside of the list
• Record every purchase you make inside and outside of your budget – at the end of a month, when you review your extraneous purchases and the money spent, it will act as an encouragement to control your spending, or
• Prepare the budget alongside your spouse or family, so that everyone contributes to it.
Aim to have a positive personal cash flow, this means your income should outweigh your spending leaving you with surplus. You should also have money set aside over your working life to provide for your retirement, this is known as your superannuation and it usually begins when you start work. The employer pays your superannuation but you can further build it by making your own contributions.
By following the simple steps above we hope that you can better understand your finances and your personal cash flow, though you should always speak to your accountant or financial consultant before making any decisions. The accountants at The Quinn Group are able to help you with budgeting and cash flow management. For more information on managing your finances, contact us on 1300QUINNS or submit an online enquiry.