Understanding Cashflow: And How to Avoid Hard Choices

Understanding Cashflow: And How to Avoid Hard Choices

“We must all suffer one of two things:?the pain of discipline or the pain of regret and disappointment.” - Jim Rohn

Cashflow isn't just a business term; it's a personal finance cornerstone. Understanding cashflow means recognising the importance of the money flowing in and out of your account each month. It's how you manage to pay bills, save for the future, and afford life's pleasures. Good cashflow management is crucial for achieving financial stability and freedom.

Understanding Discipline in Personal Finance

Discipline in finance varies widely among individuals. It's perfectly normal to exhibit financial discipline in some areas while struggling in others. For example, one might prioritise saving for a significant purchase over indulging in smaller luxuries. I, for example, am not disciplined when it comes to nice food, but you’ll find me putting off buying that new pair of trainers until mine are literally fall off my feet. Recognising and working within your financial discipline strengths and weaknesses is key to developing a healthier cashflow.

Strengthening Cashflow

Creating a strong cashflow doesn't require radical changes but rather, smart, incremental steps. Utilising credit cards for expenses while ensuring you're repaid in cash or transfers can help maintain a liquid cash reserve. The discipline here lies in not exceeding your budget and avoiding interest by paying off the balance monthly.

No Discipline? No Problem

Not everyone finds sticking to a budget easy. For those who struggle, using cash for transactions can naturally limit spending, forcing adherence to a budget. This approach, however, requires some level of planning to avoid being caught off-guard by unexpected expenses. It’s ok not to have any discipline, but you need to do a little bit of planning.

When Planning Isn't Your Strength Either

If financial planning is challenging for you, seeking help can be invaluable (is a must). Whether it's from that OCD friend, or a financial expert, gaining insight into your finances is a step towards empowerment. Society's taboos around discussing money only hinder personal financial understanding; it's time to break these barriers. Last note - we're not taught any of this, so it's ok to not know!

Budgeting is a Skill

Budgeting is not one-size-fits-all. The method that works best depends on individual preferences and lifestyles. However, the principle remains: allocate your money thoughtfully to avoid spending it on something else before necessary bills are covered. Effective budgeting means every penny has its place.

The important thing to note here is that you can only spend your money once.

What I mean by this is that you can’t say that ￡20 is for your phone bill next week, but go buy a takeaway tonight because you have it sat in your account. Ensure you single allocate your money!

Conclusion

Understanding and managing your cashflow is the foundation of financial well-being. With the right strategies, even those who struggle with discipline can find a way to manage their finances effectively. Embracing budgeting as a flexible, personalized tool can help you navigate your financial journey with confidence. Whether through self-discipline, planning, or seeking advice, achieving a balanced cashflow is within reach, paving the way for financial stability and freedom.

Where to Go...

Ultimately anywhere you feel comfortable.

I'm happy to have a chat with you on a no obligation basis and sign post you to where you would best be suited. I'm not on commission. I don't need to onboard you as a client. I just want you to start the conversation with someone. Happy for it to be me but go where you are recommended and with whom you trust.

I won't charge you for a conversation by the way. If in doubt, send a message.

Disclaimer:

This article does not constitute advice