Become the CEO of Your Cash Flow

“It probably wasn’t money that drew you to this job: nevertheless, if managed well, your firefighting salary can enable you to both live well and achieve long-term financial success. You can exchange financial stress for financial success by taking command of your cash flow.”

Ask yourself this: If a business managed its cash flow the way you’re handling yours, would you want to invest? If the answer is no, it’s time to make some changes. 

You are the Chief Financial Officer of You, Inc. and it’s time to start to take command of your cash flow and conquer your financial stress.

The basic budget equation begins with income, subtracts expenses, and leaves you with the difference – your cash flow. Negative cash flow moves you farther away from your goals, while positive cash flow moves you closer. In order to achieve that positive cash flow, you have two choices: increase your income or decrease your expenses. 

Most of us choose option one. Increasing your income should make things better, but strangely, that strategy doesn’t always work. Have you ever received a raise and then watched your lifestyle demands increase to swallow it? As Ben Franklin noted in his 1758 essay The Way to Wealth: “What maintains one vice, would bring up two children. You may think perhaps, that a little tea, or a little punch now and then, a diet a little more costly, clothes a little finer, and a little entertainment now and then, can be no great matter; but remember, ‘Many a little makes a mickle.’ Beware of little expenses. A small leak will sink a great ship.” 

Don’t rely on increasing the income side of the equation alone to solve your financial challenges. You’ll also need to plug and patch cash flow leaks to keep your financial ship afloat. 

Start with creating a budget – your financial pump panel. Your money comes in, your budget tells it where to go, and you are left with the residual. As renowned author and leadership expert John Maxwell says, “A budget is telling your money where to go instead of wondering where it went.”

Pay particular attention to autopilot expenses (e.g. subscription services) and hidden fees (e.g. account fees). These budget busters are often forgotten so if they aren’t delivering value to your life, cut them out. Amazon one-click purchase ring a bell?

Lastly, optimize your largest expenses. Housing, transportation, and insurance consume most of our income. Find creative ways to reduce your costs and don’t be afraid to make drastic changes. Car payments never made anyone rich, so consider selling a vehicle. You’ll find investing that additional positive cash flow – equal to what your car payment used to be – can make a huge difference in your financial picture. 

Set specific, measurable, achievable, realistic, and time-oriented goals (SMART goals) concerning your finances. Write them down. Put them in your notes app. Pin them to the refrigerator. Keep your goals visible and present in your mind because you’re more likely to strive towards and achieve what you see.

Remember that your goals are your best guess at your desired future. If life changes, those goals can be modified. We all know life can be uncertain, so we can’t allow our budgeting and planning to create a false sense of security.