Clear your credit card before Christmas, without giving up the daily coffee
Control your personal cash flow by creating a household budget
Christmas usually means a time for extra spending. Parties, presents and family getaways can be pretty hard on the wallet. So, in the lead up to the festive season, make it your goal to tighten up your spending and clear some of those debts so that you can enjoy the holidays without worrying about your finances.
Whilst controlling your personal cash flow should be done throughout the year and not just in the lead up to a bigger spending period, you’ll still feel the benefit of making a start now. Make that start by creating a budget. Your budget will become your best friend and set you up for a better financial future.
Running a household is not too dissimilar to running a business. You have income and outgoings, and hopefully some left over. You wouldn’t run a business without a budget, so why run your household without one?
Creating a household budget
Creating a budget starts with knowing how much money you have coming in, and how much you have going out. Income can be pretty easy to work out; simply add up your household income, plus any investments/profit shares. Outgoings, on the other hand, can be harder to track. Generally, people underestimate how much they spend and how much life costs. This is where it can be invaluable to track your spending either by using an app, or a simple spreadsheet. If you haven’t tracked your spending before, it can be quite confronting knowing how much you are spending each month!
Take control of your personal cash flow
Now that you have identified your income and expenditure, it’s time to take control of your personal cash flow. How do you manage your money? Cash flow is usually a term associated with businesses, but it’s also applicable to individuals. Our nation has the attitude of spending first, then saving what, if any, is remaining. This care-free approach means there’s no cash saved away for a rainy day or achieving lifestyle goals such as purchasing a property or investing. When it comes to times of bigger spending (such as Christmas, or unexpected expenses), we resort to credit cards and personal loans which can result in a downwards spiral.
Whilst following a budget doesn’t seem like much fun, there are huge advantages to having better control over your personal cash flow and knowing your financial situation month to month. It will soon become a habit and you’ll enjoy seeing your savings grow. A simple strategy is to create multiple bank accounts to manage your money. The diagram below outlines how you could allocate your income and expenditure. It’s always best to speak with a financial planner who will advise you on how to setup your accounts, and make managing your cash flow a straight forward and automatic process. Priority should be given to paying bills and debts, then savings and lifestyle (which can include your daily coffee!).
Whilst we all feel the pinch in the run up to Christmas, setting up a personal cash flow strategy can ease the struggle and ensure you enjoy the holiday season with minimal stress surrounding your financials. Everyone can benefit from better cash flow management, and it starts with engaging a financial planner. Our financial planner here at Carbon has helped many of our clients devise a plan that works for their lifestyle whilst also building a long-term strategy to accumulate wealth.
If you’d like to have better control of your financial future, reach out to our financial planner, Andreas Kettemann. He and his team of financial planners can help get your spending on track and plan for a better financial future.
(08) 6381 2404