Cash flow is the corner stone of your financial plan with out it there is nothing to plan, however it has been my experience that it is simply glossed over during the construction of a financial plan. That is where most people are going so terribly wrong. Mismanagement of cash flow is the main cause of inadequate assets for retirement.

Firstly make sure you know how much you earn after taxes on a monthly basis then think about how you spend that money.

• Do you take multiple cash withdrawals?
• Do you use your debit card or credit card?
• Do you find that your fixed expenses are far less than you net take home income monthly but you still have no money at the end of the month?

Well if you are using a debit card or credit card or taking ATM cash withdrawals when ever it suites you are likely suffering from what I refer to as osterige spending syndrome. If you just don't pay attention to where the money goes maybe the bills will take care of them selves. I see so many people trying to resolve this by adding up their fixed expenses and trying to spend the difference between that and their net income. Unfortunately that is an ineffective way to go about managing your cash flow. There are too many little and/or variable expenses that are often unaccounted for during these budgeting attempts.

While I do recommend you have a round figure for your average monthly expenses I worry when I hear people telling me they just use the difference for spending money and wonder why they are going further into the line of credit, credit card or overdraft every month. Well that is because they are assuming the uncontrollable are controllable and they are just not.

If a person or family simply controls their discretionary spending (assuming they can afford their fixed costs) they can start to gain some control over their finances. Doing this is what I call the anti budget. You simply agree on an amount per week (I usually recommend 10% of net income depending on the situation) that amount of money is withdrawn as cash weekly on the same day each week and divided among the family members and the family sees fit. That amount is the money used for all discretionary spending, in other words for everything you want but don't need. When the money is gone it's gone and there is no more until the next week same day. You can't get in any trouble that way, there is no overdraft on the back of your last twenty dollar bill, you can't go over your limit unless you do it on purpose. Best of all you'll only spend that cash on things you really value because you'll have to think about every penny.

While controlling your cash flow sounds simple it is certainly not easy; easy and simple are two very different things. If you really want to make the most of your current situation cash flow is where you start.

Would you like to know more about how to manage your cash flow
and how to get your family working on the anti-budget?