Personal Cash Flow Management and Financial Success!
This Personal Cash Flow System is based on the concept people use to successfully achieve financial growth and security.
Which Road Do you take. One leads to financial success, the other financial problems. Your Personal Cash Flow Management System will function best if it reflects your long- and short term goals. The purchase of a piano in two years or the decision to remodel your house next fall should influence your money management plans. The financial goals and objectives your have already established as you go through your Financial Security Analysis will allow you to personalize this system.
The above illustrations show the two primary ways people manage money.
Figure 1 represents the process people use who begin spending their income for day-to-day fixed and variable expenses such as housing, food, entertainment and debts. If they attempt to save money, there is usually no purpose designated for these dollars.
They rarely save for long-term accumulation (such as for retirement or children's education) because all the money saved ends up being spent soon after it is placed in savings. The saving that is accomplished simply becomes dollars for deferred spending.
Figure 2 represents the process which people use for successful money management. First, theuy set aside a percentage of income each month toward the achievement of long-term goals.
Then they set aside a pre-determined amount of income each month in escrow to pay, at some future time, major periodic expenses (such as car insurance or real estate taxes).
Finally, they use the remaining income to pay monthly fixed expenses and variable expenses.
These dollars are used to support their day-to-day standard of living. In using this "pay-yourself-first" system, long term accumulation of goals are achieved, and people are responsible for achieving their own financial security and independence.
The Personal Cash Flow Management System is based on this successful money management concept.
How to Implement Your Personal Cash Flow Management System!
To implement this system, you will need two checking accounts and a savings account. Don't worry if this looks confusing; as you go through the system it will become clear.
Your financial needs and desires are unique, and this system is flexible enough to accomodate them. You should tailor this system to fit your situation. This system is flexible, but also rigid enough to be a guide. If a cash flow system which you develop becomes a hindrance, don't abandon it- redesign it! The system, when sensitively shaped to your needs, won't act as a financial barrier but should do just the opposite- allow you financial freedom.