Harness your cash flow

How can you better control your income and debts so that you harness all your available funds?

When tackling cash flow planning, first look at which expenses you can actually control and how to do that. Then, your advisor can help you make any needed changes to your debt structure.

Once you take those steps, you’ll be able to see the true difference between your income and expenses. This is called your “financial independence gap.”

After figuring out how much money you have to work with, you and your advisor can create a tailored cash flow plan. This helps harness your cash flow to more effectively work toward meeting your financial goals.

The challenges

You don’t always know how much you earn versus how much you spend.

That’s because, like most people, you probably don’t regularly track your spending habits. As such, you’ll have inaccurate figures when you start cash flow planning. For example, say you think you spend only $6,000 out of the $8,000 you earn per month, but you aren’t sure why you don’t have even close to $24,000 in savings at the end of the year.

This uncertainty’s a problem since you can’t allocate and work with money that isn’t available.

You may also have debts set up inefficiently, so that you’re paying more interest than needed. In that case, you should change not only the structure of those debts, but also revise your payment schedules.

Harnessing your cash flow means cutting out unimportant expenses and inefficient interest. You’ll have more financial freedom and more confidence that you’ll meet your goals.

Stephanie Holmes-Winton is a Halifax based financial services educator, author and speaker.