Now that you’ve got a handle on your current financial health, it’s time to focus on what you’re doing daily to improve or damage your financial health.
Getting control of your finances wouldn’t be complete without understanding your personal cash-flow. Cash-flow is a fancy phrase that means the money coming into and out of your life. If you have an income and expenses, you have cash-flow. This section will help you determine, manage, and improve your cash flow.
Most people automatically think “budget” when they hear cash-flow.
For most people, budgets don’t work. In fact, they don’t even work for many businesses. When was the last time a Hollywood movie came in at or under budget? You can take control of your finances without a budget, and you’ll learn how.
Taking control of your cash-flow is at the center of your Six Day Financial Makeover because it will allow you to save more. Your ability to save more of what you earn is going to be what drives your financial transformation. Our savings provide the fuel for investing and for achieving goals. Not having a handle on income and expenses causes unnecessary stress and aggravation and prevents us from achieving our goals.
Taking control of your cash-flow isn’t just for big-wig executives making six figure incomes.
If you are retired and on a fixed income, a young executive making a good salary, or a single mom working two part-time jobs, you need to know how much money is coming in and how much money is going out. Remember, it’s not how much you make, but how much you save.
As an example, picture two friends about to depart on a long drive.
They take separate cars. One of them has a vehicle with a 60-gallon gas tank and the other has a compact with a little 20-gallon tank. It might seem obvious who is going to make it to their destination without stopping at a gas station. The person with the 60-gallon tank has a lot more resources and won’t need to refuel.
Would it surprise you to learn that the person with the small gas tank quickly and easily makes it to the destination but that the 60 gallon vehicle arrives late after a long wait at the gas station? How can that be? The larger tank provides more fuel so it should take him farther than the car with the small tank. Does it make more sense when you learn that the vehicle with the large tank is a Hummer that gets 13 miles per gallon and the car with the small tank is a Toyota Prius that gets 51 miles per gallon.
It doesn’t matter how much fuel you have, it is how efficient you are at conserving, managing, and using it. In this case, the Hummer burns through its resources while the Prius uses what it has efficiently.
When it comes to your finances, it doesn’t matter how much or little income you have as long as you use it efficiently.
So don’t worry that you can’t reach your goals unless you make a lot of money. You can reach your destination if you manage your cash-flow effectively.
The first step in taking control of your cash-flow is to determine where you currently stand. When it comes to finances and cash-flow, you are swimming, treading water, or sinking. The next lesson will help you determine your current financial state. Stay tuned!
The proceeding blog post is an excerpt from The Six-Day Financial Makeover: Transform Your Financial Life in Less Than a Week!, available now on Amazon.
About the Independent Financial Advisor
Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.