Do you find yourself restricting spending over several weeks at a time, but despite this action, still have very little if anything left over at the end of a calendar year? Is getting cash flow under control something that you would like to master this year?
If so, you need to develop a strategy to keep everyday obligations, funds for those expenses that occur once or twice per year and savings commitments from clashing with one another.
After 20 years of advising people, both domestic and internationally-mobile, on this subject, I can categorically state that those who have articulated short, medium-term and longer-term goals for their life are substantially more successful in managing cash flow. In addition, when asked about how satisfied they are with their life, as a whole, those who could see themselves managing their cash flow to achieve short term goals expressed a higher level of satisfaction with their life than those who managed cash flow to achieve a certain dollar amount each month, but did not have a compelling reason or direction to guide them. To develop an effective cash flow strategy, you need to know what you want to achieve.
Most people spend what they earn on daily living expenses and don't think about cash flow in time frames of more than a pay period. I find this habit is most pervasive in households where the major wage earner is on a work visa, although it is very high outside of this specific situation, as well. No matter what your current situation is, even if you can only clearly visualize your life to the date of a work visa renewal and have some fuzzy vision of what life looks life beyond that period, you can improve your cash flow by becoming intentional about how your money will support your life this year and beyond.
Set Your Life Goals, Then Design Your Spending Plan
Goal setting is a powerful process for getting intentional about your life. When you set out what you want to achieve, you know where to focus your attention. You'll also be better at spotting those distractions. Coming back to how goal setting and cash flow work together, you'll make better decisions about short-term wants or opportunities because you will have already decided what must happen this year. Those impulse ideas or opportunities will now be viewed as a trade-off.
Success Formulas
Sometimes it is easier to see concepts expressed as formulas. Use the following formulas to help you master the concepts. And please post questions and comments. Do you like these formulas or do they cause confusion?
Fixed Expenses + Savings for Annual Expenses + Savings for Goals + Discretionary Spending = Spending Plan
Spending Plan + Commitment + Reviews = Life Goal Achievement
Life Goal Achievement = Increased Life Satisfaction
