Control Your Outflow!
Want to improve your household cash flow? Thinking like a CEO can go a long way towards making your financial situation better and more efficient at home! Let’s take a look at some powerful insights on how corporate tactics can be applied at home.
Just as company executives contract and expand outlays to fit the company’s business cycle, so should you.
Take your savings rate. Conventional wisdom suggests you should save a steady 10% or so a year for retirement throughout your career. Instead, says Maspeth, N.Y., financial planner Michael Terry, you’re better off adjusting that rate to fit your financial situation—pulling back to, maybe, 5%, when your kids are in college and the budget is tight, then ramping up to 10% to 15% after they graduate. Once your mortgage is paid off, Terry says, boost your rate again, say, to 25%.
Odds are good that you’ll come out ahead with less pain. Take a typical 50-year-old who earns $70,000 a year, saves at a steady 10% clip, and has $350,000 socked away in his 401(k)—the target for that age. Assuming standard 2% raises and average annual returns of 5%, he’ll amass $916,500 by 65. If instead he lowers his savings rate to 5% until his kids are out of college, bumps up to 15% at 55, and to 25% at 60, he’ll have $980,000 by the time he retires.
Don’t be shortsighted
When the going gets tough, CEOs who want to sound tough often impose across-the-board cuts. Yet be careful when trying to impose this tactic at home. If you’re looking to boost your cash flow through higher wages, for instance, cutting as much from your career development spending as from your vacation fund is counterproductive. Things like “continuing education and networking are worth the money,” says financial planner David Blaylock.
– via MONEY.com
Watch Out for Over-Spending
Keeping a close eye on your personal finances (without obsessing or stressing over it, of course) can help you stay on track and achieve your financial goals. Not to mention, it makes everything easier when you can easily know where your money’s going and whether you can afford something! Let’s take a look at a few more tips for improving your cash flow.
If you are short on money and long on expenses the simple truth is that you are over-spending. While it might seem impossible to bring the two sides of your equation into balance it is worth taking a long hard look for opportunities to cut back on the money you spend every month. You may be able to cut back in several different categories, but you won’t find ways to spend less by simply stating that it can’t be done. Instead of proclaiming that you don’t have enough money, try reversing your attitude to look for ways to spend less.
Use Credit Cards Wisely
Credit cards are a seemingly easy solution to cash flow problems and while they may be able to pull you out of a short term bind, they should not be used as a long term solution to your income gap. Relying on credit when your cash runs low is a surefire way to expand your spending threshold artificially and end up in over your head when your principal and interest payments start to fall due.
Credit cards should not be used as excess spending, but rather as a means of delaying cash payments slightly to manipulate your cash flow to your advantage. This does not mean you can spend what you don’t have. Purchases must be properly planned to ensure you can make payments in full when they fall due.
– via goodcents
Do your personal finances run like a well-oiled machine? What could you do with your personal finances to make your daily life easier?