‘Cash flow’ isn’t just about cash. It’s also about the systems around generating it, managing it, and multiplying it.
Many people aim to cut expenditure to improve their bottom line, but it is also important to increase income at the same time, and to more effectively manage the use of what we have.
By following these 10 steps, you’ll be well on your way to changing your approach to money.
- Examine your ‘relationship’ to money.
Does it make you feel empowered or disempowered? What sort of beliefs did you form around money while you were growing up? What sort of family conditioning did you receive around money? Do these serve you? Is it time to rewrite your money beliefs?Start breaking old limiting beliefs today. Meet with an accountant or financial adviser to improve your financial literacy. Have a simple financial strategy drawn up and start right now to take control of your money!
- Do you know where you stand financially right now?
What is the value of your assets; how much is in your superannuation fund; how is your money invested; what rates of return are you getting; how much are your liabilities and what insurances do you have?Organize your documents, and summarize your assets, liabilities, insurances, investments and superannuation funds all in one place where everything is at hand.
- Where do you want to be financially and by when?
What will this look and feel like? What does this mean to you, in terms of financial security, family well-being, life-style, debt management, recreation and business development?Set realistic goals for 1, 3, 5 and 10 years, in measurable terms such as date or dollars, so you can see when you’ve reached this target. Write these goals in detail, or do a vision board showing what your dream life looks like.
- What is your relationship to debt?
Do you understand ‘good debt’ versus ‘bad debt’? Is your debt creating leverage, or just draining your funds? How much is your debt costing you?
Review your debts and your liabilities. Are these for business or personal purposes? Are they tax-deductible? If necessary, meet with a financial strategist to design a debt reduction strategy that will lead you out of ‘struggle’ mode.
- What is your plan to ‘save your cash’?
How much of each dollar earned do you save to invest, compared with outgoings and expenditure? Do you have ‘money rules’ to govern the use of your money? Do you have a percentage that you pay yourself first? This is important, for a number of reasons, one of which is to create a sense of empowerment rather than struggle, as either will become self-perpetuating!Draw a ‘map’ of your bank accounts, showing the purpose of each. Set weekly/monthly amounts allocated for various purposes, such as bills, investments and holidays. Remember to include a ‘fun money’ account too!
- Is your money making money?
Or do you have to work hard for every dollar that comes in? When we spend what we earn, we need to go and earn more! When we get our money, even a small percentage, to work for us, then we can create cash flow that will grow to support your spending. Most people get these in the wrong order.
Review your accounts and investments: are they earning a decent return for you, in terms of income or capital growth? If not, is there a better use for those funds?
- Are you spending your valuable time and energy on your cash flow drivers?
Are you working on the activities most worth your time and attention, or do you waste your time/energy/money on low-value tasks that could be delegated, while you could be undertaking higher-value tasks that could be charged out to create cash flow? Simply being ‘busy’ does not necessarily equate to being productive or constructive.List your 4 or 5 core ‘drivers’, and focus your time on these tasks, while delegating more of the ancillary tasks that take up your valuable hours and energy. You’ll quickly see a boost in your results and your enjoyment!
- Do you have your assets – including YOU – adequately insured?
Did you know that you can hold some of your personal insurances through your superannuation fund? Have you had a specialist assess your insurance needs to ensure you are covered for the right things and the right amount? What would happen to your family if you were unable to work for any length of time? Have you discussed estate planning if you were to die?Review the insurance policies you hold over your assets, and also your personal policies, such as life, TPD, trauma or income protection. Meet with a financial adviser to discuss your optimum level of cover to avoid being over- or under-insured. Meet with a solicitor to discuss your needs around wills, Powers of Attorney, and guardianship of young children.
- Is your superannuation part of your financial discussion?
For many people, this aspect is forgotten or ignored, as they see it as a ‘necessary evil’, with no guarantee of it being there when they retire. There are a few styles of superannuation funds, and each should be weighed up given your personal circumstances. Regardless of what you do or don’t have in super, NOW is the time to bring this back into the conversation and get it working for you!Include your superannuation in your financial conversations from now on; meet with a financial adviser to clarify where your superannuation is invested, and what the associated fees and insurances are, to consider whether this is the best fund for your money.
- Is your business structured in the most appropriate entity for income-splitting, asset protection, capital growth and tax management?
Do you hold assets – personal or business – that should be protected via a company or trust? Do you have the correct structure for distributions to other family members? Are you aware of all of the tax deductions that you are eligible for, either as a business owner or an employee?
Consult with your accountant to discuss your personal needs, in light of your financial goals and proposed wealth creation strategy. Clarify those expenses that can be treated as a tax deduction to you, to ensure you minimize unnecessary tax, and identify how best to maximize your business profits.
Written by Dianna Jacobsen, Shine At Business, Bartercard Australia Member.
Combining a background in accounting, financial planning, small business management, and personal empowerment coaching, Dianna specializes in working with businesses, families and individuals to guide them to freedom and success, focusing on all aspects of business and personal development and financial strategy, from day-to-day financial, time and staff management, to farm succession planning to partnership dissolution.