Monitoring Cash Flow is Always Smart! Exactly what is cash flow? It’s the flow of money into and out of your financial accounts each month. Even if you are fortunate to have periods when you have more income than you want to spend each month, it’s wise to calculate your monthly cash flow. This is a smart habit for several reasons.
Accomplish Your Money Reasons Sooner
First, you can challenge yourself to reach some of those money reason goals sooner than you thought possible. For example, if your goal is to donate a certain amount to a children’s shelter by the time you are 50 years old, maybe you can do it when you are 47, simply by spending smarter. You may find yourself thinking that, instead of spending that $100 on yet another another “doodad” you don’t need, you’d rather the money go toward books at the children’s shelter.
Feel Good About Spending Your Money
Second, tracking your money helps you to feel good about what you do spend and keeps you from spending money on things that really don’t matter. When you monitor your spending, you naturally spend more consciously. Just try it; it really makes a difference when you know you are going to have to reduce your cash flow number for yet another pair of black shoes, when you have challenged yourself to reach a certain amount of positive cash flow for the next month.
Spending Expands To Fill the Gap
Money is like time; it fills a vacuum. Our spending will grow to suit our income, just as our time expands to fill whatever block we have allotted for completing a task. I am not asking you to be stingy and frugal in monitoring your spending; spending creates jobs and opportunities for others. I am suggesting that you spend savvy and smart!
High Income Periods Often End
The last reason for calculating your monthly cash flow is that the high income periods of our lives often don’t last forever. There are exceptions to this, of course, such as royalties and income from passive business ownership or real estate, but, even then, the unexpected can happen. It is hard to imagine during your prime earning years that your skills could become obsolete (which is happening more and more with new technology) or that the company that pays you so well could terminate your employment or go bankrupt. Unfortunately, both of these scenarios happen on a regular basis.
The bottom line is this: Taking an half hour once a month to complete simple a cash flow statement is time very well spent. It helps you focus on how to grow your money, and creating a rich life full of the things that really matter. Financial women are cash flow queens!