“I want to improve my cash flow, but… what are my options?”

Whether you want to stop struggling over bills or just have a little bit more money at the end of each month there are ways to improve your cash flow.

What Is Your Cash Flow?

You want more cash but do you really know what your cash flow is? Cash flow measures the money coming in less the money going out. For most of us we have a good handle on what comes in and a not so good idea of what goes out. Time to make a cash flow statement. Not sure how to start? Take a look at our Financial Fitness Cardio test. Total up all income for a month. Then, using your credit card statement, bank statement and anything else where you have monthly expenses, start categorizing a list of all monthly expenditures. Use categories like mortgage/rent, loan payments, utilities, credit card payments, groceries, child expenses, entertainment and the “scary because you have no idea where that money went” category. Now take those numbers, add them up, and subtract from your income. Is it a positive or negative number and what does it mean?

Where Can You Make a Real Difference?

Looking at the categories, you really do know what you should and can change. The question is what will you change? Let’s start with something with less emotion tied to it – interest payments. To be considered financially secure your debt payments (excluding a mortgage) should be less than 20% of your monthly income. To get a quick snapshot take your results and go to our Financial Fitness Flexibility test. To improve your fitness you have to pay down your debt or make more money. Take a look at each debt payment and the interest rate being charged. It may be time to consider refinancing your debt through a consolidation loan. By taking high interest debt and consolidating it into a single, lower interest rate loan you will pay less interest thereby increasing your cash flow and decreasing the time to pay off your debt. There is a snag though. Once you pay off your debt you cannot start all over again. Once they are paid off your responsibility is to keep them paid off each month.

Now look at the other categories to see where you can decrease expenses. Continue to track expenses for a few months. Many people will actually start spending less when they track money going out. Remain positive, it took a while to get where you are and it takes time to change.

Consolidating Debt: Do You Know the Traps to Avoid?

Ahh you say, I could use a LOC or take the balance transfer offer on my credit card. Yes, you would pay less interest, but because this is revolving credit it becomes very difficult to pay down and off. And for many who try this tactic their debt not only doesn’t get paid off, it increases over time as interest charges mount. Fixed payment, fixed term is the way to pay off your debt.

How Can Your Financial Advocate help?

Come in with your financial information (all of it, the good, the bad and the just plain ugly). We’ll help you sort it out and give you the advice and tools you need to start making a difference now. WE C.U.™ so you can be financially fit faster.