When creating a financial plan, sometimes it becomes necessary that we change our current cash flow situation. This can occur due to discovering that we do not have the cash flow required to reach our short and long term goals.
Unfortunately, most of us don’t make this change until its already too late. Having the information necessary to make sound financial decisions, before you are negatively impacted, is one of the greatest benefits of the financial planning process. So if you have already determined that you need to develop a few cash flow improvement strategies, the following ideas should help.
Leverage Existing Financial Opportunities
During the financial planning process, you might come across some opportunities that you can leverage to increase your cash flow. The following are some common ways to save money and improve your financial situation.
Debt Restructuring - If you have loans such as credit cards, mortgages and personal lines of credit, sometime its advantageous to consolidate these liabilities to a lower interest rate. Depending on the terms of your mortgage, you could significantly increase your cash flow by refinancing to a lower rate.
Employee Benefit Plans - Most employers offer benefit packages that include 401(k) contributions, IRAs and Flexible Spending Accounts that allow you to leverage before tax dollars. This reduces your tax liability and increases your cash flow without the need to reduce retirement plan contributions or current health care benefits.
Re-prioritize Goals and Objectives
More often than not, our current financial situation causes us to rethink our life’s goals and objectives. One of the most common compromises that we must make is to work longer than we wanted. Making the decision to retire later than desired is not a easy decision to make, however if enough money was not saved or investment assumptions were not accurate this might be the only option. In addition there are some other changes that can be made such as sending the kids to a State College verses a Private University and delaying large purchases.
Executing the option to change your lifestyle is not as simple as leveraging existing opportunities and re-prioritizing goals and objectives, however our lifestyle is usually the number one cause of our personal financial problems. It’s human to place more value on consumption today than consumption in the future. This is an adapted version of the time value of money, yet it’s still extremely accurate.
Changing our lifestyles sometimes entails buying a less expensive vehicle than we want, not going out to dinner so often or opting for a local vacation verses one in the Caribbean. Making changes such as these are compromises, but sometimes they are the only way we can reach financial freedom and our goals and objectives.
I hope this information provides you with some ideas that will help you increase your cash flow and improve your financial situation. Changing our habits, behaviors and lifestyle is easier said than done. However we are extremely adaptable and if you plan well and put your mind to it you can accomplish success in anything that you do.