How To Help Control Cash Flow
By Robert A. Mecca, CFP®, MBA
Vice President of Wealth Management
October 10, 2019
A coin has two sides. Likewise, there are, at minimum, two ways to attain financial success with regard to building assets … maximize cash in and minimize cash out. Both work in tandem to help increase cash flow when needed. Most people concentrate their attention on one side of a coin which includes investment returns (cash in). The other side is just as important, that being to monitor and control expenses (cash out).
I continue to say: “He who controls cash flow wins the game.” This interpretation suggests that when money going into your pocket exceeds money going out, you are on the correct path to financial success. Having appropriate strategies on both sides of the coin is important to your financial well-being.
It is here where I want to concentrate on the other side of the coin - expenses. Do you know what your monthly living expenses are? I mean ALL the cash you spend, even on frivolous things. Most people don’t have a clue, therefore, it is here where we ought to start.
Take a look at major expenses. Your mortgage is a good start. What is your rate of interest? With interest rates relatively low, look into refinancing to lower your rate and possibly reduce monthly cash outflow.
What about your rent? What percent of rent do you pay each month compared to net income? Add all utilities and insurance costs. If this totals over 30%, there may be an issue. Prudent strategies to modify should be addressed.
What about other debt such as student loans, vehicles, credit cards? What are the outstanding balances and interest rates? Look into consolidating to a lower rate. What can you do to start paying off this debt completely?
Take a look at all your insurance costs including home, renter, auto, liability, motorcycle, boat, medical, life, disability, professional, etc. I am pretty confident most readers would be shocked at what they are paying each month in total insurance costs. It is here where many stumble with cash flow. They are sold insurance policies they might not necessarily need with overpriced premiums and wrong deductibles.
For life insurance, look at the reasons why you have it. Are those reasons still valid? Then look at the total death benefits versus your goals. Maybe all those old policies taken out long ago are no longer needed. Look at the premiums you pay and cash value. Look at the type of life policy you own…term, whole life, universal life. The kind of policy impacts your premium. Be cautious using your whole life policy as an investment tool. Re-evaluate all your life insurance contracts for their intended use and make sure they are designed with the right structure for the required outcome. You might save on potentially needless expenses.
Home, renter, boat motorcycle, auto, umbrella insurance premiums can all add up. When was the last time you had an independent review of your policies? Are your deductibles proper? Are your benefits in line with the age of the vehicles? Do you have proper liability protection? Investigation and proper resolution might be a resource for increasing cash flow.
For insurance, the key is to have proper coverage without overpaying. Don’t skimp on benefits, but likewise don’t pay more than necessary. Have appropriate protection at a reasonable price.
There are numerous important strategies to improve cash flow that one might take to become financially successful.. I mentioned just a few examples. There are more. Controlling expenses is where the rubber meets the road. At minimum be cognizant of where your money is being spent. A strict budget is not what I am talking about; just getting a handle on money flow both in and out.
You might feel overwhelmed with this and don’t know where to start or turn for help. A well-qualified Fee-Only Certified Financial Planner, CFP ® as your partner can provide an independent, impartial, comprehensive analysis on both sides of the coin to help secure your financial future. I am pleased to be part of the Strategic Financial Group team. Together, we are here to help.
Remember…He who controls cash flow wins the game!
God's Love Letter
“To the man who pleases Him, God gives wisdom, knowledge and happiness.”
“The Lord is gracious and compassionate, slow to anger and rich in love. The Lord is good to all; He has compassion on all He has made.”
“Remember your Creator.”
“Fear God and keep His commandments, for this is the whole duty of man. For God will bring every deed into judgment, including every hidden thing, whether it is good or evil.”
Care for your pets as you do for yourself.
They are family and bring warm love into your life.
Unless otherwise expressly indicated, the opinions or views expressed in this article are the author's own and do not reflect, and may differ from, the opinions or views of StrategIQ Financial Group, LLC or others within StrategIQ Financial Group, LLC, including its officers, managers, owners, employees or other service providers.