The most frustrating thing about being a gainfully employed adult is feeling like you just do not make enough money to support your life style no matter how high your salary gets. You might think, if I just make $5K or $10K more, I would be set! But what I have found is that, to a certain extent, it really does not matter how much money you make if you have poor money management skills. There are plenty of people in this world making six figures who constantly have to rely on their next paycheck just to make ends meet.
So what’s the problem?
Besides having expenses that might be higher than their income, many people do not manage their actual cash flow. Meaning, they are spending without regards to when money is coming in or when money is going out. They are not planning ahead for when they will need to spend more, or when their income is lower than average.
What is a Cash Flow Projection Tool?
A cash flow projection tool is a tool that allows you to list out your income based on when it is coming in and your expenses, based on when it is going out. It differs from a budget because a budget is static and just looks at one point in time. You may make $5000 a month, but if you have $4500 worth of expenses due the day before your second paycheck, how do you manage that?
In business, companies create monthly cash flow projections 12 months out, so why not do it in your real life? In my life, I have a cash flow tool that I use that is based on my bi-monthly salary and I project out my balance on a two to three month basis. I always make sure that I have enough to pay all my bills, save and invest. I also have a checking account just for my bills, so I have to be super careful that I am transferring enough at all times.
When setting up your cash flow, my suggestion is to list out all of your income, your fixed expenses and then start plugging in the amounts that you want save. If your goal is to increase your debt payments, then put those higher amounts in next. After, you can put in your variable amounts and then adjust as necessary. Your goal is to have a positive balance at the end of each cycle.
If you would like to try it out yourself, Grab the tool here! https://focusedspender.com/budget-tools/