Hearing the word budget makes some of us cringe and feel claustrophobic. If this is your reaction, then it is time to shift your paradigm from budgeting to cash flow planning.
Cash flow refers to the money that flows in (and out) of your life. How will you plan to orchestrate this flow? Here are a couple of good tips to cash flow planning.
- Where is your money currently flowing to? It is hard to make a viable plan if you don’t even know where you are currently spending. Track your spending for at least one month. The easiest way to do this is carrying around a little notebook with you to record your purchases.
- Now that you know where your money is flowing too you can begin to pool your money into areas—car payment, house payment, insurance, groceries, entertainment. Where are you spending too much? Where can you guide the money to? This step helps you plan the cash flowing into your life—where will it go and what will it be spent on?
- Every dollar has a name. This is important! Scenario: You figure your paycheck and have $50 left over. Sweet! So, you put that in your wallet for a rainy day and a week down the road all that is left is $2.53. What happened? You didn’t have a plan for that $50 so it flowed out of your wallet. Every dollar that comes into your life should have a name to it—groceries, allowance, savings, etc. If you end up with money left over after allocating your income into spending categories, then have a plan before hand of where that should go. For example, if you decided any extra money you received was going to go into your travel fund, then that $50 would have automatically gone there and you would have been closer to meeting your vacation goal than if you just put it in your wallet. Give each dollar a name and a place to go.
- Flow in > Flow out or income > spending. When your income is greater than your spending it means what? You’re saving money!!!! Great job. Set your budget up to make this possible.
Looking for a good, free budgeting too? Log into your WebBranch and click on MoneyDesktop. MoneyDesktop has a great budgeting tool that allows you to set your categories and amounts. Then, as you spend from your checking it automatically fills in your budget data and color codes it to show if you’re within your budget, getting close to meeting it, or going over. There is a short video to watch that can explain how to do this. Here is also a link to show you some steps to create your budget in MoneyDesktop: http://moneydesktop.zendesk.com/entries/20457573-the-budgets-app.