To keep your finances in order, personal cash flow is an excellent tool to manage your money. The term refers to the total of constant and sound assets that are available in a given period, so it is a way to establish your liquidity.
What is it for? In general, cash flow analysis can detect problems such as:
- Lack of liquidity: refers to the cash you have at the moment. Sometimes you don’t have it, but not necessarily because you don’t have it, simply because it’s invested or compromised, but it’s still part of the assets.
In this case, carrying out a personal cash flow would help you to know how much money you have and in which assets you have used it, for example, in protection, in retirement savings, among others. In the same way it helps you to detect remnants, which can become an opportunity to grow that money. In more technical terms, it serves to analyze the viability of projects to increase your capital.
How to make it?
The idea of making a personal cash flow is to know in depth the way you manage your money. In general you can start with the following steps:
- Open a spreadsheet in Excel.
- In the columns you will set the periods; It can be per week, per month, depending on your needs.
- In the rows you will place the income and expenses: the income refers to all the money you generate, on the other hand the outputs are all the money that is required for you to operate, which include your vital needs such as clothing, eating, expenses in your home transport
- To the sum of all your income you must subtract your savings and your expenses, what result did you get?
a) Your income is less than your expenses: you are in trouble because you live on a loan to cover your needs.
b) Your finances are balanced: Although you are not one of those who spend more than what you enter, any unforeseen event can take you out of balance.
c) Your income is greater than your expenses: this should be the scenario to which we all aspire. You have the opportunity to save, as well as face unforeseen events and achieve your goals.
According to your results you will have to adjust your balance and make a savings plan so that you can be in the ideal scenario.
Improve is possible
To improve a cash flow in the business field it is necessary to reduce costs, in the case of a person it is about spending less than what you perceive.
For this it is necessary that you have exact calculations, it is also important that you reduce expenses. In this case you can verify which of your expenses are not vital to eliminate them.
Punctual actions to improve is to change your consumption habits. If you eat on the street, then you can save if you prepare your food. You can prepare your coffee instead of buying it. Programming the change of your clothes store during sales may be another option. If your mobile phone plan is very broad, maybe you can reduce it. Finally, these are small things that, although they are not visible to the naked eye, make a difference in your income.