Is your cash flowing?

No matter how much money we have, or what stage of life we are at, we all have to make decisions about cash every day. Some of these are small, like your morning cup of coffee, while others are much bigger like a new car. Are your cashflow decisions helping you achieve your financial goals?

Let’s compare "cashflow" to the strategy you used to get where you are in your career. There was most likely some study involved, a lot of motivation and dedication to make it happen. Initially there was a goal or a target you wanted to achieve, and you had to train, practice and get in the habit of working towards this goal. I’m sure there were many excuses you could have used, however, with a bit of perseverance, you kept working towards your goals, and you got there in the end right? The same skills apply to managing your cashflow.

The first step is to admit to your spending habits, which category do you fall into?

Living month to month – waiting with anticipation to be paid.
Focus on looking rich – using cashflow to gain expensive assets that depreciate in value and do not create extra income.
Using positive cashflow to gain assets that creates more income.

5 tips to break your cashflow habit

Changing ingrained money habits is hard because they are rarely taught. Most of us learn them from our parents or guardians. The best way to change this is to have a replacement habit waiting to take over. Try these 5 simple steps, we have found that help break the habit:

Set goals – visualise where you want to be financially and write down your money goals and a timeline so you can monitor your progress. Once you have committed to a list of goals, you should have a stronger motivation to change your money habits.
Pay yourself first – have the discipline to pay yourself a set amount to cover your day-to-day living expenses. By using a central cash hub you can arrange to have your living expenses and bills automatically transferred into a transactional account for you to access. Meanwhile, the remainder of your salary accumulates in the cash hub, so the money you have worked hard for starts working hard for you.
Think like you’re a business – Understanding a few key cashflow measures can help you make financial decisions and monitor your progress, just like a business. These include your income statement (what you earn versus what you spend) and balance sheet (what you own versus what you owe). Another key measure is your cost-to-income ratio – the percentage of your income (salary or wages) that is used to meet expenses (accommodation, food, entertainment, insurances etc).
Start budgeting - The first step towards controlling your cost-to-income ratio is to have a budget or cashflow plan. Your budget should take into account your entire financial position so it is important to make a list of all of your expenses.
Get advice - One of our strengths at Altus is to help you practice better cashflow management. We have the specialised expertise to give you individual advice on ways to manage your cash more effectively.

We see poor cash management all the time, and have the specialised expertise to create a strategy that's right for your situation, so you can achieve the financial goals you've pictured.

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Supercharge Your Superannuation & Maximise Your Retirement Savings

Shane Brennan

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