Cash Flows, Tracking Expenses And Incomes
The number one thing to know about healthy cash flows is that it's not good when money is laying somewhere without flowing and helping business. That's why we call it a cash flow. Money is suppose to move.
Everyone likes receiving money, but not everyone likes to spend it. However, if you're not really a spiritual person and don't run on sun energy, water, and wind and you do accept that money is necessary in our lives, then I'd recommend you start to love spending money. Of course, that doesn't mean that you need to spend enormous amounts on everything you see and become a shopaholic. You just need to stop regretting money that you've spent. This is not right in terms of cash flow theory. Moreover, regret about something is a bad thing itself, and if you have a lot of regret, then it's probably the right time to change something. Start with forbidding yourself to regret about anything. Convert it to receiving an experience, a paid lesson.
Cashed Out All His Money
Someone told me a story about one businessman who went to his bank several times a year, cashed out all his money, and then went to his office and counted notes. After that, he went to his bank again and put all his money back into his account. Why did he have such weird behavior? He wanted to remind himself that he was really a wealthy person and he owned all that money. He felt all that energy from observing physical notes on his desk in the office.
Of course, that's a little bit weird behavior, and I don't do it myself, but it was really interesting to hear about a real person who does that. Also, I believe that it's getting more difficult to do things like that since we are getting used to understanding our money as digits in a bank account. But you still can feel that energy by buying experiences and tools. Basically, getting access to things isn't free. Doing so can remind you that you're wealthy and that it does make sense to accumulate more wealth, even if it looks like digits.
Rich People vs Poor People
The attitude that rich people have towards money is different from the philosophy of poor people. Moreover it can be the main problem for poor people in general. As a rule, poor people don't like to spend money at all, even on things that are necessary. It's important for them to buy the most low price goods, and the quality isn't as important. They usually complain about and critique the product or service for its quality after they buy it cheaply. So they think that the product is poor quality, the sales person sold a bad product to them intentionally, or that the shop where they purchased their item is bad.
The main problem with this is that people acquire lots of habits and mindsets that constructs the buying process as a negative activity. Basically, they think that buying something is really bad for them and that they waste their money every time they do it.
Wealthy people, on the other hand, value their money and they know how to save it, but at the same time, they easily spend money on things that seem reasonable for them, even if these things are expensive.
Why Is It Important To Track Your Expenses?
Smart people track their expenses to understand their financial habits. There are a lot of tools and apps that help manage this. You can find an expense tracker for your business or a personal expense tracker for your own needs. Some people still use Excel tables or even paper notebooks to keep everything in order. Tools like these help to understand where your money is going and where they come from.
Why is it so important and why everyone should try it at least for a month? It's because in the modern world we have a lot of distractions and life doesn't seem that stable as it was before, especially, if you're working remotely and traveling in different countries.
Some people don't realize how much do they spend on digital products along with things that they buy offline. You subscribed to a cool online service in the morning then grabbed something for lunch, topped up your phone balance, ordered Uber. Some things have been paid with a credit card, some by cash. That could be a lot of numbers. We need tools to manage all of this.
Tracking income isn't less important than tracking expenses. We've talked about tracking expenses, but what if you have different income sources?
Let's say you are a freelancer or you have a business online. So the situation changes every month or even every week. It's not bad, but you need to observe changes somehow. So you can cut expenses on things that are no longer necessary in your life or business or invest more in some areas that you think worth it.
Also, you need a basic understanding of your finances in the long run. As for the income, I believe it's wise to write down all of the earnings you've got each month during the year, and then you can see what worked best for you visually, the average income, the best month. And from there you can realize why some of the spikes and dips happened and what could impact on your cash flow. Things like this can help increase the amount of income in 2-3 times a year. I'd say it's one of the undervalued techniques in personal finances.
Sounds Boring, Too Much Of Numbers?
You can't hold all these numbers in our head. So you need tools like apps, spreadsheets, notes, etc. Anything that helps to do a brain dump and then analyze all of the numbers to manage your cash flows wisely, improve your life and business.
That's also the way you can save your time if you can organize and automate everything. Also if you acquire right habits about your finances and how you do everything.
The cash flow topic is endless, and I believe that everyone who earns money online or just starting out think about finances at the first side. I think it should be effortless and don't take much of our time. However, you need to check up on this from time to time to understand your current status and a little bit think about the future and how to improve the cash flow in the long run.