When it comes to achieving your financial goals, having a good grasp on your personal cash flow is essential. Whether you’re trying to save for retirement, pay off student loans or put money aside for a large purchase, learning how to increase your cash flow for personal finance can help you reach your financial goals faster.
All of us depend on a personal cash flow in one way or another. Think of the term “cash flow” as interchangeable with income. For most people, a salary or compensation from a job is the most common form of income.
However, more and more workers across all income levels are having a harder time making ends meet, let alone be able to save, invest or pay down debt. In fact, 58% of Americans (or roughly 150 million adults) are currently living paycheck to paycheck.
It doesn’t matter how much money you make at your job if you don’t have anything left over at the end of the month. It makes it nearly impossible to reach your financial goals, which can result in needing to take on more credit card debt, defaulting on loans, or struggling to keep your lights on.
Trying to reach your personal finance goals faster? Learning how to increase personal finance cash flow is a fantastic tool to master.
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How to Increase Personal Finance Cash Flow: 10 Ways
The method to increase your cash flow is actually pretty basic, and comes down to three main areas:
- Decrease recurring expenses
- Increase recurring income
- Create a new source of income
Each of the ideas listed below have this approach in mind.
Know Where Your Cash is Going
The first step to learning how to increase your cash flow is to first understand where your money is currently going. While you probably have a good idea of how much you make per paycheck or per month, most people don’t have a good grip on how it’s being spent.
Similar to what I recommend when it comes to creating a budget, the first step is to sit down a map out all of your income or cash flow for each month. This might include a base salary, commissions, 1099 work that is variable, or income from side hustles.
Next, look at how your total personal finance cash flow is being allocated before expenses. For example, some people contribute 10% to a 401(k) or contribute to a health savings plan directly from their compensation, before it ever hits their bank accounts. Others set aside a portion of each paycheck into a savings account or savings app.
All of these are important to know before looking at your monthly expenses, to be sure that your current allocations are aligned with your personal finance cash flow goals.
Next, go through your bank statements for the past 3-6 months to create a chart of your monthly expenses. Be sure to check every bank account so you don’t miss something!
Some of these will be fixed expenses and the same each month, like your mortgage or rent. Others might vary, like the electric bill. However, without having a clear picture of what you’re spending and when, you can’t learn how to improve your cash flow.
Create a Budget
Based on the information you compiled, create a true budget. A budget allows you to track your income, expenses and the work you’re putting in to cut those expenses in one easy to manage place.
Having a budget is a fantastic tool to improve your cash flow, because it builds awareness of how you’re spending your money and where by tracking spending patterns. There are lots of ways to do this, from a traditional pen and paper budget to an Excel workbook to full-service accounting software.
A budget also can help you change your regular spending habits over time, which in turn allows you to increase your positive cash flow. It also allows you to easily see where you might have cash flow problems. When you’re first starting out, be sure to evaluate your budget on a monthly basis.
For more information about creating a budget, check out How to Use the Cash Envelope Budgeting System (Free Printable Cash Envelope Template) and The Ultimate List of Budget Categories (Free Printable).
Reduce Your Expenses
The most obvious way to increase your cash flow is by reducing what you’re spending each week or month. The easiest place to start is by looking at your variable expenses or “extras.”
There are certain expenses that can’t be reduced, such as your mortgage. However, there are a LOT of living expenses and extras that the average person can reduce or cut out entirely.
For example: take a look at the amount of money that that you are spending each money on delivery, take out or just eating out in general. For most people, this expense line item is usually the one that has the most opportunity to reduce. Those $15 lunches out 3 days a week translate to $780 a year!
Consider instead learning about meal planning or couponing and hitting the grocery store to cut your food expenses. As much as you might love the convenience of fast food, you’ll love the financial freedom more.
What about subscription services that you really don’t use much, like a gym membership for a gym you haven’t visited in 6 months, premium radio subscription or magazines? All of those “small” expenses can create a real opportunity for increase your cash flow and helping you reach your personal finance goals faster.
If you’re currently living paycheck to paycheck and spending everything you make, there’s nothing leftover at the end of the month to help you save for big purchases, put away money for emergencies, or pay off debt. Reducing your monthly expenses might feel challenging at first, but can pay off in a big way quickly.
Shop Around for a Better Insurance Rate
Insurance is a recurring expense for everyone, but most people kind of forget about it. Life insurance, car insurance, home insurance, rental insurance and more can take up a large chunk of your monthly budget.
It’s easy to put these expenses on autopilot and forget about it, but by shopping around for better insurance rates, you can actually save a substantial amount of money!
Check Your Interest Rates
Debt can feel overwhelming. It can be monumentally more challenging to tackle it if you are also dealing with a high interest rate.
If you have credit card debt, contact your financial institutions directly and ask for a reduction of your interest rate. A lower rate allows you to put more money towards paying down that balance.
If you are juggling student loans, look at what interest rates are available for refinancing. Lower loan payments can allow you to can allow you to put a larger total amount of money towards your goals.
Get an Energy Audit
Feel like your utility bills are through the roof for no reason, or just curious if there’s a way to trim this amount? Look into a free energy audit.
An energy audit is basically an inspection of your property that identifies areas that your home is wasting energy. Many places offer this for free to anyone who offers. Just Google “[city name] energy audit” to see what the options are by you.
You might be surprised what you learn about your home and ways that you can reduce your utility expenses!
Start A Business or a Side Hustle
Find that after cutting your expenses you are still in need of more money to reach your goals? You’re not alone! Most people realize that in order to really make a dent in their financial goals, they need to increase their personal finance cash flow by taking on an additional job.
Unlike in the past, this no longer has to mean taking on a second traditional job. Instead, the gig economy and side hustle culture have transformed the opportunities for making more money in a great way.
Do you have a skill, talent or idea that could translate into a job or service? Consider starting a small business or working as a contractor! From freelance writing to dog walking, side hustles are a fantastic way to bring in extra income without feeling like you’re working outside the house around the clock.
Make sure you have a goal for the increased cash flow. Reinvest the money from your side hustle into your personal finance goals, such as growing your long-term savings, retirement savings or paying down debt. You can also reinvest the money into your business to help it continue to grow.
For some ideas, be sure to also read Easy Side Hustles to Consider in 2022.
Sell Digital Products
Need an additional revenue stream? The internet has created the ability to increase your income in all kinds of ways, including creating and selling digital products! From e-books and e-courses to invitations, calendars, printables and more, you can increase your income by creating items that customers can purchase and print on their own.
The sales revenue from digital products is also passive income, resulting in extra cash without you having to spend a bunch of time actively working every day.
Digital downloads allow individuals to either use your product as just a graphic or virtual item, or print them if they would like something physical to hold onto. Websites like Etsy, Zazzle and more allow creators to list and sell these products, making an income when they are sold.
If you own your own home or have a second home, consider using it for rental income. Companies like AirBNB have made it possible for you to increase your cash flow by renting a room or whole home through their websites.
For many people, this has become a sustainable way of increasing cash flow. Keep in mind that there are expenses associated with any kind of rental property, so be sure to do your due diligence in researching the pros and cons before jumping in.
Negotiate a Pay Raise
If you are employed, it’s likely that once a year you have a performance review. This is the ideal time to re-evaluate your compensation and have a conversation with your employer about getting a raise.
Be sure to talk about the value you bring to the role and organization, and have an idea in mind of what you want. It’s very common for employees to ask for a raise, so don’t feel nervous! An increase in income can help you reach your goals faster.
If you are a 1099 contractor, be sure to also evaluate you rates at least once a year. Most clients expect that prices will increase.
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Final Thoughts on Increasing Cash Flow
No matter your long-term goals, having extra money to put towards them will help you reach those goals faster. Before you get to work on increasing your cash flow, be sure you first understand how much money you are bringing in and exactly how you’re spending it each month. This is the best way to set yourself up for success.
Creating a budget, cutting expenses, and finding ways to make more money can all help free up more money to increase your cash flow and reach your goals. Make smart choices, focusing on paying down debt, creating an emergency fund and saving for big purchases instead of putting things on a credit card without a plan.
No one feels good struggling to make ends meet. Increasing your cash flow can give you peace of mind when it comes to your future plans and long-term financial goals. Be sure before you make any big financial decisions (like a rental property) that you talk to a financial advisor.
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