Just as companies can plan their finances, people must also do so with the aim of avoiding risks and surprises. The personal cash flow is an indispensable tool to manage your money, that money you generate as income in a given period, for your income, your salary, your business, etc. The question is what is it for? It becomes vitally important in our day to day, because the analysis of cash flow allows us to detect problems in time and also when projected on a time horizon allows us to determine the future income and expenses experienced by a person.
Such as planning Financial in a company
Lack of liquidity is also one of the problems that we can identify, because with the flow you can realize if you will have enough cash to cover your expenses.
In this case, making a personal cash flow will help you know how much money you have and in which assets you have them distributed; a savings account or other investment instruments. In the same way it helps you to detect surpluses, which can become an opportunity to grow that money. In more technical terms, it serves to analyze the viability of projects to increase your capital.
Revenue refers to all the money you generate daily, weekly, biweekly or monthly. Expenditures or expenses are all the money that is required for you to operate, which include your vital needs such as clothing, eating, household expenses, transportation, credit payments, insurance, etc.
How to make it?
Remember that taking advantage of Excel, you can add or remove the rows that are needed (both in the “Inputs” section and in the “Outputs” section of cash) and that way you can customize this tool. In addition, the total and total sub cells are automatic.
In the ranks you will place the income and expenses according to your needs and reality. At the departures, the amount you must place to save is considered (minimum 10% of gross salary).
What are the possible scenarios?
If your income is less than your expenses, you are in trouble because you live on a loan to cover some needs. If your finances are balanced, any unforeseen event can take you out of balance. If your income is greater than your expenses: you have the opportunity to save, as well as face unforeseen events and achieve your goals.
This should be the scenario to which we should all aspire.
According to your results you will have to adjust your balance and make a savings plan so that you can be in the ideal scenario.
To improve a cash flow in the business field it is necessary to reduce costs, in the case of a person it is about spending less than what you perceive. For this it is necessary that you have exact calculations, it is also important that you reduce expenses. In this case you can verify which of your expenses are not vital to eliminate them and start making a flow of daily expenses (write down everything you spend, from the purchase of a candy to that of pants).
The implementation of this practice, gives the person the ability to analyze the possibilities of obtaining excess liquidity, thinking about the issue of savings, if such surpluses are obtained, the most prudent thing is to think of an investment alternative that allows make trade to leftover resources.
This practice can also help us to measure the degree of indebtedness and its impact on cash flow, and in this way the person can define their real financial situation and design a contingency plan if necessary.
You have the opportunity to start today to make your projected cash flow.
Your budget should answer the questions: what and how much will I spend? While the cash flow analysis should answer: when will I spend it?