We all know that money make the world go round. It is important to have enough money to meet your day-to-day needs and to support you current cash needs. Developing strategies to help generate the flow of cash is important in determining how much cash flow you will have. Developing a personal cash flow helps people maintain their lifestyles and focus on their needs.
There are benefits to having a personal cash flow strategy. It help maintain your lifestyle, you can increase charitable giving, or pass money to heirs. With the appropriate strategies, you can keep a cash flow regardless of the current market cycle, and meet your ongoing cash needs. There are seven steps to help increase and maintain your cash flow:
1. Define Your Cash Goal: Focus on what you need from day-to-day, week-to-week, and month-to-month. Set financial goals that you are comfortable with and that fit your basic needs and lifestyle. You should set a target amount and establish a date when you want to reach the goals you set. You can set short term that last only months or long-term goals that could last decades.
2. Define Your Source of Cash: List all the source you expect to receive money from, other than your financial assets, with the amounts and dates for each source. This could be a paycheck, social security, etc.
3. Define You “Number”: This is your target number that will allow you to be comfortable and pay your bills on time. This number should also include a cushion that could sustain you for six months to two year depending on how much of a cushion you feel you need to sustain your lifestyle over the time.
4. Define Your “Window”: The “window” is the amount of time you must be “locked-in” to your cash flow for you to feel comfortable that you will be able to maintain your lifestyle. You don’t want a down turn in the market to make an abrupt change in your lifestyle.
5. Develop an Investment Strategy: Talk with an advisor to help you figure out what would be the best course of action for investments. Establish your risk tolerance, and what would be an acceptable minimum return for each investment.
6. Implement and Monitor You Wealth Plan: This is the step where you monitor and adjust you investments to get the cash flow you planned. You can allocate funds into different investments and review the performance making sure that your goals are in track and completed in the time allotted.