Cash Flow Management. What To Know and How Can It Help You?
If you ever google financial planning, there is no doubt that you will quickly come across the idea of budgeting. At Creekmur Wealth Advisors we prefer to focus less on budgeting and lean more into cash flow management as a foundation for beginning your financial journey.
What is Cash Flow Management?
It is simply knowing how much money you have coming in versus how much you have going out. Being clear on your true income and expenses allow you to accurately assess your overall financial health. It is important to track your income, so you know if you are using your money towards the things, you truly value. Cash Flow Management is simply an awareness of your inflows and outflows.
What is not Cash Flow Management
It is not having a budget, tracking exactly where every penny goes. Budgeting is a form of cash flow management, and it can be extremely helpful. If you currently budget and it works for you that is a great way to be aware of your cash flows and we encourage you to continue this path!
If budgeting seems overwhelming or has never stuck for you that’s fine too. What is important if you are not budgeting is to be sure you are aware of where your money is going. For people who don’t like budgeting I like to encourage using a conscious spending plan.
A Conscious Spending Plan
A conscious spending plan takes the stress out of cash flow management. First set your savings to be automatic. Automatically match your employer sponsored retirement plan. When your paycheck hits your checking account have your money you want to save automatically moved to your savings account. Next move money into a separate payment account to cover your fixed expenses. Whatever is left over in your checking account can be spent on anything you would like! If you are unsure how much to save reach out to your advisor to begin building this plan for your goals!
This method works because you can see how much of your income goes to savings, fixed expenses, and to discretionary expenses. It makes tracking your money easier and it helps to reduce the stress of following a budget. Your savings and fixed bills are covered so there is no guilt with spending additional money on your favorite coffee! For more information on this check out Ramit Sethi’s article https://www.iwillteachyoutoberich.com/blog/conscious-spending-basics/
If you like to budget or would like to try out budgeting as a cash flow management option here are a few different tools that can help!
- Quicken: Simplify
- Every Dollar Budget
- Google Sheets Budget Template
Ultimately it does not matter what cash flow management option you use. If you love to budget and have a good system that is a great option. If a conscious spending plan would be better for you go ahead and give it a try!
If you have questions on how to use cashflow management or want an advisor to give cash flow recommendations, please reach out to us!
Connor Creekmur, MBA