Creating a Positive Cash Flow
“Do not save what is left after spending
but spend what is left after saving.”
– Warren Buffett
A Cashflow plan gives you control over your money. It starts with a very simple concept; know how much money you have coming in and where it is going. This is the starting point of every financial plan. It is not your income that determines how wealthy you become but rather the decisions you make with the money you earn. Having a strategic cash flow plan gives you clarity, and allows you to see how you can make the best use of your money.
There are three types of expenses; necessary expenses (those needed to meet the necessities of life); accommodating expenses (those needed to make our lives easier); discretionary expenses (the luxury expenses). All these expenses come with choices. Whether you buy name brand foods or their value equivalent is a choice. Whether you take the bus or buy a car to get to work is a choice. Whether you live in a small home or a mansion is a choice.
A Cashflow plan is all about prioritizing and understanding the consequences of your choices.
If you want to change your current financial situation, there are steps you can take to get you to your goal.
Know your financial position – Know how much money is coming in and where it is going. Know your assets and what they are doing for you.
Eliminate bad debt – make your money work for you, not control you.
Set financial goals – Know what you want and why you want it.
Have a plan – You can’t get where you are going if you don’t know how to get there.
Make a commitment – Work towards attaining what is important to you.
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