As the current recession continues to widen and deepen and credit markets tighten, it has become painfully apparent that cash is the king in this environment. With high unemployment, poor investment returns and declining home equity, your family’s f
As the current recession continues to widen and deepen and credit markets tighten, it has become painfully apparent that cash is the king in this environment. With high unemployment, poor investment returns and declining home equity, your family’s financial survival may depend in a large part on your ability to manage your cash.
Managing your cash
The major areas of effective cash management are: understanding your income and expenses; maintaining your income and reducing your expenses. The cash that you save can be used to either reduce debt, build an emergency fund, or provide for future financial goals, such as education and retirement. Below are my five steps to cash management.
Five steps to cash management
Step 1 – Start by gathering your financial records for the past three months to determine your monthly net income and expenses. Since income and expenses can vary from month to month, you may have to estimate some cash flow items for all twelve months to come up with a monthly average.
Step 2 – Create a Cash Flow Worksheet. This will give you a baseline for your monthly cash flow. You can set up your own spreadsheet or use online resources such as: http://www.moneycentral.msn.com; http://www.mymoneymanagement.net or purchase software programs like Quicken or Microsoft Money. (These websites are provided as a courtesy and are not under the control of Financial Network Investment Corporation.)
Step 3 – Use your Cash Flow Worksheet to track your actual expenses. At the end of each month, tally up all of your income and expenses, using your pay stubs, checkbook, credit card statements and receipts. Buy a pocket-sized notebook to keep record of out-of-pocket cash expenses, such as taxi fares, lunches, haircuts, movies, magazines, etc. Now compare your actual income and expenses with your original estimate and readjust your estimate.
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