You’re asking how to improve your cash flow, and that’s the right question to ask. I’m going to share 4 steps you can immediately take in service of doing exactly that.
The first is easy. Second one’s simple. The third and fourth will require more thinking and doing, but you’re fully capable of executing them.
Over the course of my 20+ years as a financial advisor, I’ve helped countless people improve their cash flow. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
When you improve your cash flow, you position yourself for greater success in every area of your financial life.
Here’s what we’ll cover:
- Become the CEO of your life
- Audit your cash flow
- Earn more
- Live on less
- Additional resources
Let’s get started.
Become the CEO of your life
This step is easy. It only requires a shift in your mindset.
When you think of a CEO, who comes to mind? Do you think of Elon Musk or Jeff Bezos? Perhaps you think about an investor like Warren Buffett, or an executive like Sheryl Sandberg?
I’d like you to think of yourself as the CEO of your life; specifically, your financial life. There’s never going to be anyone who is more interested in financial success than you are. And nor should there be.
Now, this doesn’t mean you need to be the one who is doing everything. Your role as CEO requires you to oversee every aspect of your finances, and to delegate where appropriate.
This may mean you decide to hire someone to prepare and file your taxes, or to manage your investments. It could mean you decide to hire a CFO (like a financial advisor) who will be in charge of your financial life.
However you decide to move forward, the buck stops with you. It’s imperative to accept ownership of your financial success and take an active interest in it.
Audit your cash flow
This is the simple step. It only requires you to look back over your past financial transactions.
The vast majority of Americans, almost two-thirds, aren’t paying attention to their cash flow. When you take this into consideration, there’s little doubt why so many people are struggling financially.
You audit your cash flow by logging into your financial accounts and reviewing your transactions. However long it’s been since you last did this will determine how far back you review. If it’s been a year, look back over the last year’s worth of transactions.
When you’re not paying attention, things slip through the cracks. You end up paying for things you don’t use, or that you no longer value enough to continue paying for. My wife and I fell into the trap of not paying attention to our finances early in our relationship. When we finally ripped off the bandaid and reviewed our cash flow, we found hundreds of dollars of monthly expenses we could easily get rid of.
Look for things you can easily cut out and do it. If you’re unsure about whether you want to get rid of something, take a couple months off of it and see if you miss it. You can always add it back in later.
John Wesley famously said, “Earn all you can. Save all you can. Give all you can.”
Though it doesn’t always feel like it, we have a limited amount of time to work and earn income. Therefore, we need to do everything we can to maximize it.
Are you currently working in your career? If not, what’s stopping you from pursuing the work you truly want to be doing? Can you develop a plan for transitioning from what you’re currently doing to what you want to be doing?
If you’re currently doing the work you want to be doing, how can you earn more? How can you get promoted? Is there a certification or designation you can earn that would allow you to earn more?
Have you considered starting a business or a side hustle? What will it take to get that off the ground?
Creating a plan is your first step. Decide on action that will allow you to earn additional revenue. Figure out what new learning is required for you to do it. Come up with a plan for obtaining the learning, and then putting it into place.
Live on less
And now for the hardest step and most unpopular step; living on less.
I’ve never taken a vow of poverty and I don’t expect anyone else to. But, if you want to improve your cash flow, and you’re not in a position to earn more money, living on less is your only option.
When considering making hard choices, it’s imperative to get clear on what your future will look like should you make changes. I’ve rarely seen people be successful in making hard financial choices simply for the sake of making hard financial choices. I’ve seen people make incredible sacrifices in service of getting to a better place financially.
In service of helping you get clear on your goals, you can access our Goals course for free.
You’ll need to go through your monthly budget and look for opportunities to make changes. Often, we overspend on our living arrangements, vehicles, and food away from home. When making changes, I encourage you to think about them as temporary. Once you get on the right track, you can always add things back to your lifestyle.
If you’re in credit card debt, getting out should be a top priority. The average credit card interest rate is over 20%, and that’s crippling financially. Getting out of credit card debt will improve your cash flow. In service of helping you do this, you can access our Get Out of Debt course for free.
Improving your credit will also help your cash flow. Work to get your credit score over 620 as soon as possible. This will allow you to qualify for conventional financing. If you’d like to dig deeper into this, check out our Improve Your Credit course.
Following these 4 steps will help you improve your cash flow. You’re someone who can be financially successful. Get started!
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
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