“I don’t have enough money.”
“I can’t afford it.”
Sounds familiar to you? I’ve heard people say this so many times, and not too long ago, so have I. It’s not uncommon for a lot of people to be in a situation where CASH is scarce, and they end up borrowing, or foregoing certain wants, or even needs just because they do not have the money to pay for it. Sadly, in most cases people actually end up borrowing money NOT because they wanted to, but because they had to. In my previous blog, I wrote about Randell’s 5 No Non-sense Steps in Personal Finance, and the first step is Improving your Cashflow.
Simply put, one needs to make sure that money coming IN, is greater than money coming OUT. Do not spend more than what you’re earning or able to make. There’s a lot of advice you can get from people around you on how to achieve a positive cashflow, and you can even find a lot of articles online. Allow me to share with you the things I learned and did to help me achieve a positive cashflow.
1. Assess your Current Financial Capacity or Status.
It’s very important that you make a clear and detailed assessment about your current financial status. How much money are you making per month? How many sources of income do you have? What are the things you need to pay for? Who do you owe money to?
By knowing your current financial standing and being “realistic” about your situation you will be able to determine where you currently stand, and come up with a more detailed action plan. After all, the only way to address a problem is by acknowledging that there is a problem.
2. Create a Budget, and STICK TO IT!
What is a Budget? A budget is simply a recording of your expenditures, and your income. A spending plan that allows you to track your expenses, against your income so you know exactly how and where your money is spent.
After assessing your current financial standing, you should now be able to determine just how much money you actually have, and how much you can spend. Make a detailed list of the things you need to spend on for a given period (weekly, monthly, yearly). List down your expenses, and make sure to identify if the items in your budget are WANTS or NEEDS. People without a budget often wonder where their money went because they didn’t make a record of the inflow and outflow.
If your expenses are higher than your monthly income, then make some adjustments. Go through your budget again. Check which expenditures you need to cut back on. If you have set a budget for travel or dining out, but you still have loans or credit card bills to pay then you NEED to cut back on your little luxuries for the time being so you have more money left for other more important things. Keep making adjustments until your budget ends up with a positive balance, or at least zero. Once you’re done with the budget, make sure to stick to it.
Once your finances start to improve, you can make certain adjustments to allow for little luxuries. A budget after all is not set in stone, but more of a guideline for you to follow so you can better manage your income and expenses.
3. Find other sources of income
If your monthly balance still ends up ZERO, or negative even after you’ve made the necessary adjustments, then it’s time for you to find means to add more income streams to supplement your monthly income. Sell some of the stuff you no longer need like old clothes, or household items. One man’s trash is another man’s treasure, right? If you have a lot of extra time after work, then get a second job. Nowadays you don’t even have to go to an actual office to work part-time. Thanks to innovations in technology, you can even work within the comforts of your own home. If you have internet at home, and a computer then you can look for online freelance jobs. A lot of freelancers make more money than those working full-time desk jobs in offices. If you’re entrepreneurial then you might want to put up a small business and make some money on the side. Your business idea just might end up becoming your main bread and butter.
4. Invest in yourself.
“An investment in knowledge always pays the best interest”- Benjamin Franklin
If you’re not sure what to do, then go out there an learn. Read a book on how to put up a business, sales, marketing, autobiographies of successful people. Don’t just sit there and spend hours browsing through social media reading useless feeds about some celebrity who got caught up in a scandal, or spend time reading about the latest gossip. Knowledge is Power, and one of the most powerful tools you can have in your arsenal is information. There’s so much information available at your fingertips. Can’t be bothered to buy a book? Go online. There’s a lot of information available online that can help you. If you don’t want to read, and don’t have the money to pay for seminars then go look for free seminars. There’s a lot of FREE financial literacy seminars/workshops available every year, and even the government offers cheap, if not free seminars on entrepreneurship. All you need to do is have the initiative and the drive to get your butt off the couch and grab every opportunity you can to learn, and feed your mind with useful information. Even highly successful people like Warren Buffet still continue to read and learn. The man is one of the richest people in the world, and still spends 80% of his time reading.
5. Apply what you have learned.
What’s the point of reading all the books in the world, and attending every single seminar you can go to if you don’t apply what you’ve learned, right? All the knowledge you have gained will be for naught without APPLICATION. Put everything into action. After I attended each financial literacy seminar, and read every book on investing that I could get my hands on, I immediately identified the steps that I needed to execute, and put them into action. That’s the only way you can ever get results.
When I was just starting out on my journey to improving my finances, I too struggled a lot. Back in the Philippines when I was still working in the BPO Industry where I was earning more money than most people my age, I found it really hard to set aside a certain percentage of my salary for savings. In fact, I hardly saved anything at all. I was living paycheck to paycheck, and sometimes even ended up having to borrow some money. I used to blame it on the income tax, and other deductions on my paycheck for SSS, PhilHealth, and other things. “I’m not making enough money” was my most common excuse every month. Things didn’t change much when I started working in the UAE where my salary was TAX FREE, and I didn’t have any deductions. I incurred huge credit card debt, and still ended up living paycheck to paycheck. It wasn’t until I attended a few seminars by professional financial advisers like Randell Tiongson, Jess Uy, Marvin Germo, and Investhusiasts that I learned how to manage my finances properly, and started saving and investing. I had to surround myself with people who had the right mindset so I can emulate their example and do better. It was not easy, mind you. Old habits die hard, and it took me a while to really get into the rhythm of things, get my act together, and start developing healthy financial habits that allowed me to set aside a certain amount every month for my savings, investments, and insurance. It’s not easy to develop financial discipline, but it’s also not an excuse why you should be more responsible when it comes to managing your finances.