Life Decisions That Can Improve Your Cash Flow

Sometimes, no matter how hard you try to improve your finances, things just don’t seem to work the way you expect them to. You’re neither extravagant nor are you buried in debt. You try to stick to your budget, live within your means, and invest some of your income but you still feel that you are far from hitting your long-term financial goals. Or worse, still find it hard to foot the bills.

If you’re in such situation, you might be wondering what else you’re missing, how else can you improve your finances when you’ve tried almost every financial advice you can find. You might even believe you are destined for a life of just enough.

But don’t despair. Most situations in life, especially economic situation, can be improved if you want it badly enough. What with the real-life stories of people who started from the bottom, they were so deep down below that there was no other way than up. Think Manny Pacquiao. Maybe what you actually need is to make bigger decisions to make a bigger impact in your finances. I’m not saying we should try boxing for money. Just a few tweaks that can improve our cash flow because…

Cash flow is key

What is cash flow and why is it a key to a good financial shape?

Simply put, cash flow is the flow of money in and out of your pocket. It can either be positive or negative, as a result of the tug-of-war between your income and expenses. If, for instance, you earn $4000 a month and spend $5000, you have a negative cash flow.

A negative cash flow means financial hardship. If you earn $4000 and spend $4000, you are fighting for survival.

If, however, you earn $4000 and spend only 50%, then you have a positive cash flow. The remaining money gives you options to save more or buy assets, which in turn generate more cash. If you were a business with a negative cash flow, your bottom line bleeds red. With a good cash flow, however, a business can spend more on marketing to attract more customers, buy more equipment to expand production, or even buy other companies.

This is what makes cash flow the lifeblood of your financial health and the key to your financial goals.

What cripples your cash flow? 1. Expensive lifestyle. Living above one’s means may make you look rich on the outside but you’re keeping pennies instead of bills. 2. No budget. You don’t know where you’re spending your money on. You simply spend because you can. 3. Debt. Debt, especially high-interest debt, chokes your cash flow. Debt is a good predictor of financial hardship.

So how do you improve your cash flow? Either you (1) improve your income or (2) reduce your expenses. These may entail not-so-easy decision though.

Find a better paying job

Sometimes you get so comfortable with your job that you become scared of trying your luck on others even when opportunities are already staring right at you. You fear that it will be difficult to adjust to a new job, neighborhood or state, you lack the skills and all such mental barriers. Thing is, you will

never really know unless you try. What we know, however, is that a better paying job may be able to improve your cash flow. Research about jobs and industries that pay better than the rest and direct your effort towards landing on one.

Move to a job with a better upside potential

This goes to the younger adults who are just starting out in their careers. Be willing to start from the bottom, be trained by a mentor, and work your way up to a better career. The job may have a lower pay at the start but there may be a big growth potential in the industry that will benefit you in the long term. Younger people can take more risks when it comes to their career because they have less at stake: no family to feed, no mortgages and hopefully little credit card debt.

Get a sideline

A little bit of humility will also go a long way in helping you improve your finances. Get a second job, even if it doesn’t sound so good to your ears, then you might be able to pad your income a little more and ease your cash flow.

Consider a 2-income household

If you’re married and have kids, consider talking with your better-half about her getting back to work, especially if the kids don’t need fulltime care from one of you. A 2-income household could mean a significant increase in cash flow. Make sure, however, that you’re not sacrificing your family, or a great relationship for an income.

Reduce your discretionary expenses

Discretionary expenses are expenses that aren’t fixed, unlike your rent or insurance or car loan. These may include your food, transportation, electricity, etc. You have some control over these expenses and the little savings you could have from them will add up. You might want to dine out less often and pack your lunch to work, make your own coffee instead of buying branded ones, or you can save a lot by using coupons and buying on discounts.

Move to a cheaper apartment or city

Alternatively, you can also move to a place where the rent is significantly lower. Rent, which is a fixed monthly expense, usually takes a bigger bite in our income and sometimes a compromise to a smaller space may be the quickest solution have.

Here in the U.S., many couples move to states cities with lower costs of living, or if they’re retiring soon, move to a state with better tax benefits for senior citizens.

All these, of course, are big decisions that are difficult to make. However, you need to be objective rather than sentimental about things. If numbers tell you that things aren’t working in your favor, you would need to make adjustments…some of which require changes you never thought will happen.