What is Cash-Flow and Why Should I Care? Part II
In the previous post, What is Cash-Flow and Why Should I Care? Part I ,we reviewed two areas that immediately impact your cash-flow as soon as you’re paid. The first area represents government regulated withholding, for taxes and Social Security. The second area represents self-regulated withholding, for Health and Retirement.
The income you receive after withholdings is referred to as “Net Income”. This is the cash-flow you can actively manage to accomplish what matters most to you. Managing your finances well is just as critical as managing your time. Either you consciously guide and direct where your money flows, or everyone else will.
You are in the driver’s seat. This is your journey. You decide what is most important.
A good place to begin actively managing your cash-flow is taking an inventory of where your money is currently flowing. Map out all the different ways you have leveraged your income over the past twelve months. Include any gifts, refunds or cash you received. Organize your results as best as possible, by category or purpose.
Now think about how you would really like to leverage your cash-flow. Identify at least four specific areas where you want to focus on improving this year. Write each one down and include a clear statement about what you want and why it matters. The more emotion and purpose you can attach to each one will help remind you along the way.
For each of the four areas you’ve chosen, answer the following questions:
- What step will I take in the next 48 hours to get started?
- Who can help me when I get discouraged?
- What obstacle(s) could prevent me from succeeding? What’s my plan of action?
- How can I redirect cash-flow from another category or increase cash-flow to accomplish this?
- How will I track and celebrate milestones along the way?
- How will I know I’ve succeeded?
Finally, set reminders on your calendar or task manager to review your progress on a regular basis. When you receive a pay raise or bonus, direct at least 50% of it towards your four areas of focus. Be creative and have fun crafting the life you want.
Best of success in taking the next step! I’d love to hear your stories and insights you discover along the way.