subject: Developing a Cash Focus to Ensure Your Financial Survival [print this page] Developing a Cash Focus to Ensure Your Financial Survival
Cash flow management is at the heart of any workable way of handling your personal finances. It is a core principal embraced by those who have tuned into the most successful method of protecting one's stability and ensuring long-term financial survival.
Knowing your income, understanding your expenses and setting up an envelope system are only part of the story, though.
In order to make the plan work you need to develop a cash mindset. You need to work from the principle that you are not spending a dime more than you have allocated to any expense and that credit cards are not a good "gap bridging" solution.
"If you have debt, you will need to implement a smart pay down method to eliminate it. We recommend following a systematic guide to utilizing the so-called "snowball" method. That involves listing your obligations, paying them from the smallest balance to the highest, "rolling over" the amount originally paid on the smaller debts to the large ones as you progress."
When you are working on eliminating that debt, go right ahead and take a pair of scissors to your credit cards. You are building a cash-only mentality and will not be using those cards again. Eliminate the potential to backslide by destroying the cards.
Like it or not, however, carrying plastic is essential to functioning in society these days. As such, you will need to obtain a MasterCard- or Visa-branded debit card that is tied directly to your checking account for those occasions that require the use of a card.
At this point in time, you will be ready to create your cash flow plan.
That involves following a systematic approach of organizing your monthly payment obligations (after you have found a way to make sure those payments do not outstrip your monthly income). You will then set up a series of envelopesone for each expense. After you withdraw a sufficient quantity of cash to meet those obligations, you will place the right amount of cash into each envelope.
After committing yourself to a cash-only lifestyle and maintaining it for the full month, you will track your spending amounts, allowing you to fine-tune your envelope system and to tweak your cash flow plan for maximum effectiveness. This is an important part of the process. Life and expenses are constantly changing and only those who keep a close eye on those changes can hope to chart a course to long-term financial survival and responsibility.
We live in a debt-based culture.
We are accustomed to using credit instead of cash and to purchase what we want even when we cannot afford it. Developing a cash focus is a radical departure from that usual way of thinking.
As such, it is tough to make the transition in mindset. You will be fighting prevailing mores and your own socialization. That requires a great deal of commitment and a smart plan.
As you can see from this brief overview, getting from the status quo to a cash-based system does require some planning and effort. In order to get the job done, you will want to utilize a comprehensive guide that breaks down every step in the process one by one, showing you exactly what you need to do grab the reins of your financial life.
Are you sick of living in debt? Are you worried about your ability to provide for yourself when you hit retirement?
Has the recent economic downturn derailed your previous plans or forced a need for change in your spending and savings habits? Are you just ready to have control over your money instead of letting your finances control you?
If you answered "yes' to any of those questions or if you have another motivation for improving your approach and outlook toward financial matters, adopt a systematic approach that will allow you to break from the herd toward a new, cash-based mentality and all of the advantages that come with it.
