In household finances as well as in business, aim to have more coming into the bank than going out.
It’s that simple–especially if you plan ahead.
Life doesn’t have to be as complicated as we make it. Forget the “10 Fundamentals to Money Management” and the “8 Essential Habits of Financial Wizardry.” Assets and expenses and liabilities and the financial statements that comprise them all come down to one thing: positive monthly cash flow.
If you have money left over after you’ve paid the bills, you’re growing. If you don’t, you need to go back to the drawing board. At Foster Financial, we create customized cash management plans that keep you focused on the bottom line. Here’s how it works:
Budget for the Basics
Rent doesn’t change month-to-month. The electric bill is consistent, or at least predictable. These costs, as well as payroll, inventory, etc., are non-negotiable. You can’t run a household, let alone a business, if you don’t keep the lights on. Customized cash management plans can get pretty detailed, but essential outlays can basically fall under one umbrella. After the bills are paid (the present), make a contribution to the savings account (the future).
Save for the Future
There’s nothing worse than borrowing money to cover basic expenses, but a close runner-up is having to pull money out of savings. We highly recommend setting up automated minimum withdraws from your revenue or income streams so that there is always money in savings. We also encourage our clients to outline both short- and long-term goals to save toward. That may be a new software program; it could be a new vehicle; it could be a new fleet of vehicles. The important thing is to work toward a goal.
Invest What’s Left
Idle money gets slippery. It demands to be spent. If you’re not putting all of your profit into savings, don’t throw it away: invest. In business, there’s not a lot of room to splurge, but “investments” don’t have to be stocks or real estate. You can invest in your staff with trainings, morale-building lunches, or weekly raffles. You can invest in education and certifications, renovations, or custom maintenance. The goal here should be to relish in the thrill of spending your hard-earned money without feeling guilty afterward. If you spend money on things that have a return value, you’re not only tasting the fruits of your labor, but you’re boosting the long-term success of your personal or professional life.
With a custom-made cash management plan, you can know exactly when, where, and how your cash needs will occur, how best to meet those needs, and where you’ll be not only in a few months, but in years to come. We can help not only budget and save, but also create payment plans that help build strong relationships with the bankers and creditors you’ll need at the next stage of your development.
Give us a call at (602)833-3260 or contact us online to learn more about starting a cash flow projection that’s specific to your needs.
Tax Tips for the Self-Employed
529 Savings Plans
The Advantages of Being an S-Corporation
Understanding Your Balance Sheet
How (And Why) to Create Your Business Budget
How to Invest Your Business Profits