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Why Cash Flow is King

Why Cash Flow is King

| September 26, 2019
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Setting up a monthly budget can be an invaluable exercise, weather you make changes or not you will still walk away with information that can be very empowering.  Most of us don’t know where all of our money ends up going every month.  Often, it’s lots of small leaks, death by a thousand cuts, that ends up wrecking our monthly plan. 

You start by listing out all of your sources of income: W-2 Wages, dividends and interest, any rent received, side job income, social security or pension payments, expected tax refunds, etc.  Next list out all your recurring monthly expenses.  I suggest taking annual expenses such as insurance premiums and putting it into a monthly amount.  Once you get everything in the Excel spreadsheet you will get to see how much is left over every month.  This amount is not the amount “you get to spend,” it is the amount have available for investment. 😊  This is the most important number on the spreadsheet, and it is the one you should work to improve. 

Focusing on the “leftover” money number is helpful because spending less and making more are both important and this will help you make improvements in both areas.  As you pay off debt and eliminate monthly payments and create new income sources it will be exciting to see your financial freedom (breathing room) take shape.  Once the spreadsheet is created you can use it for years to come. 

I recommend taking a close look at your bank and credit card statements every six months.  While our intentions to save money are good, it is very common to have your recurring expenses rise over time.  Given the way our society is structured, it is far easier to consume than it is to produce.  You monthly surplus will grant you safety that will undoubtedly be helpful when those “one-time” expenses crop up.

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