Manage Personal Cash Flow as if You are a Business


cash flowCash Management is vital to the success of a business because it allows the business to pay it’s bills while using cash efficiently to fund day to day operations. Consumers can benefit from managing their own cash in much the same ways a business does. Being able to project cash flow can allow consumers to better plan for expenditures and avoid dipping into savings or using credit to make up the shortfall.

Cash Available and Bank Balance are Not the Same – Cash available is the amount of cash you have immediate access to minus the anticipated expenses for the near term. Many people get themselves into trouble financially because they don’t have a clear understanding of their cash needs for 2-3 months in the future.

Cash Flow Projection – One of the easiest ways to project your cash flow is to use financial software such as Quicken. The Cash Flow Calendar in Quicken shows your projected cash flow months and even years in advance. A trick that I used was to enter budget items like auto repair and vacation savings as a recurring bill. By doing it this way they would show on the cash flow calendar and I would have a much more accurate picture of my cash flow for the remainder of the year.  I could also perform what-if scenarios by entering recurring transactions and see the impact on cash flow.

Sources of Cash in Emergencies – Sometimes the unforeseen happens and you may find yourself short on cash. A properly funded easy access savings account with an emergency fund of 3 to 6 months of expenses will allow most individuals to handle most emergencies. However, there are other sources for cash such as liquidating assets, an easy online-cash advance,  or short-term financing. Each has it’s advantages and disadvantages so research your options before making a decision.

Make Your Cash Work for You – Credit Unions are by far the best choice for most individuals with small cash balances as their fees are generally less than large banks. For those that have large cash balances the options are greater. Most banks and brokerages have cash management accounts that allow you to write checks from a money market account which typically pay more than conventional savings accounts. Laddering CDs to mature at 1-2 year intervals is another conservative alternative to obtain higher returns and still ensure you will have liquid funds available.

Readers: What strategies do you use to manage your cash?

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20 Responses to Manage Personal Cash Flow as if You are a Business

  1. SB @ One Cent At A Time 07/13/2012 at 4:26 am #

    Yup, manage like a pro!

  2. krantcents 07/13/2012 at 6:01 pm #

    I manage my cash like a business that have very little cash! I put savings first! I review y expenses monthly to monitor and reduce them. I try to keep my spending levels in tight control. It works for me!

    • Paul 07/13/2012 at 11:53 pm #

      Although businesses have larger cash amounts they are dealing with, the concept is pretty much the same. Maintain a safe but small cash balance and invest excess cash in vehicles with better returns.

  3. Josh @ Live Well Simply 07/13/2012 at 6:21 pm #

    This is excellent advice. I have many friends who have two ‘businesses’ in Quickbooks, one for their small business and one for their personal finances.

  4. Andrea @SoOverDebt 07/15/2012 at 1:31 am #

    I really like this idea, especially projecting future cash flow. When I was actively adding to my mountain of debt, I NEVER thought about the future. A dollar today was a dollar I could spend, not one I needed to save for tomorrow or next week. That mindset is what helped create all the problems I’m trying to undo now.

    • Paul 07/15/2012 at 8:29 pm #

      It can help in managing your personal finances if you know your cash balance for the next few months. There are lots of methods to project cash flow but I found Quicken easy to use for that since I already have most of my financial information there.

  5. taxation services 07/19/2012 at 3:11 am #

    Thanks for sharing these useful tips. Managing cash flow can be a difficult task for those who do not have a background in commerce. I think you have provided a very helpful piece for such people.

    • Paul 07/20/2012 at 2:49 pm #

      Using an app like Mint makes keeping a current cash balance easy. Glad you found these tips useful!

  6. funancials 07/29/2012 at 10:26 pm #

    I spend on what I need. There’s very little thought that goes into it. I don’t buy things because they’re on sale or because someone else has them.

  7. Edward Antrobus 08/07/2012 at 4:08 am #

    This is exactly what I do, instead of a traditional budget. Back in the days when the daily balance was usually under 3 digits, it was absolutely neccessary to make sure there would be enough money on, say, the 12th to pay the bills due that day.

    • Paul 08/07/2012 at 1:15 pm #

      Definitely a more simplified way of budgeting. For me, I need to keep track of my spending at a more detailed level.

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