Saturday, March 1, 2014

The important cash flow management in financial planning

The cash management in personal finance is very important. No matter how much money that you can stream. Some rich man are not astute to manage the money. They cannot save the money whereas they need it to fund the college. The kids need money for college but the they spend money for holliday. To pay the college, the father borrow the money from the office. As consequently, the office will cut the paycheck every month until the debt is settle.
With good cash flow management, you can get benefit from some cash flow management:

Avoid debt or liquidity
As the illustrative above, the family could avoid debt if they can manage the cash well. If they can provide more cash, they do not need to borrow money. Borrowing money can increase the cash outflow of the family. They should find the money.
Cash is the king. Though, you have abundant asset, you must need cash. For example, you still need money to buy a car. The car owner does not receive the payment with house or land. You need to sell the house or land first but it is not easy job. You cannot sell it for short time. You must wait until a right person want to pay your asset on right price.

Risk management
The cash flow management help us to manage the risk. We can earmark our money to investment portfolio. When the ecomic hit the bottom, we can have some money from overseas investment.
Some people prefer to buy life insurance. They also buy house insurance or car insurance to protect them from loss.

The cash flow management can help you in budgeting your money.The cash inflow should be equal with cash outflow. It is not difficult to manage the cash above the paper. Write down the spending that you need or you can make it on spreadsheet. If you find the spending is higher than the income, you need to reduce the spending. Find the most unneceesary spending for you to delete it. When the budgeting has so much excess income, you can save it or invest it.

Managing financial commitment
It is not difficult to make a budget but it is difficult to commit with your budget. Khalil Gibran have ever said that man often make rule and they disobey the rule. Most of us often disobey the rule. The cash flow management lead you to commitment.

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