Water flows, energy flows, and money flows so how and where is your money flowing? Hopefully more is flowing in than is flowing out! If not, time for some changes and fast! Hopefully money is flowing into your freedom fund (aka retirement) and some is flowing to reduce your debts and some is flowing into other “fun funds.” Of course, I know a lot is flowing to the grocery stores and gas stations of the world as well. Today, let’s ask a few questions about how your flow goes.
- Do you have times of the month when the outflow is more than the inflow and the stream runs dry? If so, do you have sufficient cushion in your account to carry you through the dry spell until the next inflow or are you scrambling? How might you fix that going forward?
- Do you have a good handle on where all of your money flows? In other words, do you track your spending? If not, how might you take a step in that direction?
- Consider the following and rank them in an “ideal” world:
- Long-term savings (freedom, retirement)
- Short-term savings (a vacation, a project, a new thing, kids’ college)
- Debt repayment – bare minimum
- Debt repayment – working to be debt-free
- Adventures & activities
- Lifestyle – this is can be broken down any number of ways but here is a very easy one:
- Must have (food, shelter, utilities)
- Nice to have (eat out, entertainment, etc.)
Ranking these items in a non-emotional, outside-the-moment way gives you some perspective on what is truly important to you. Now, start tracking your actual spending – your cash flow – in those same areas. You can go back to last month and look through your bank activity to see which categories your money actually flowed to versus your ideal ranking.
If you go through this exercise for a month or two, you may see some things that you love and some things that are not quite sitting well. Knowledge is power, my friend, so if you see something that is out of alignment between the areas that you truly value and where you are spending your money, it’s time to make a plan! For example, if more money is flowing to stuff than to adventures, make a plan for this month to be different. You and only you can change where your money is flowing. Start today; you’ll be glad you did.