Cash Flow Management

Managing your cash flow can be quite a challenge.
Every day, you are bombarded with a deluge of information from numberous medi sources offering you the opportunity to either invest or spend your income. Many of those messages can stand in clear contradiction.

The objective of Cash Flow Management is to provide you with guidelines to help you make better everyday decisions. These decisions will significantly impact the money that you accumulate and keep throughout your lifetime. Therefore, these guidelines can be very valuable.

ASSETS AND LIABILITIES
Whether you realize it or not, every day you spend time managing two aspects of your wealth: assets and liabilities. These assets and liabilites can be divided into short-term and long-term categories.

Like many people, you may feel that your liabilities are reasonable, managable and well under control. Therefore, you spend very little time considering their true cost or whether they might be magaged more effectively. In relation to the total amount of money that you manage, the liability side of your ledger probably accounts for the largest allocation of funds. In contrast, what little time is spent in management is probably spent on the asset side of the ledger. This will become more and more evident as we explain our program.

The main objective in managing your assets and liabilites is to increase your Circle Of Wealth.

For most people, income from their paycheck or investments flows first into a short-term account, such as a family or personal checking account. Unfortunately, from that position, money can be easily diverted down the path of least resistance to purchase the things we either desire or need each and every day. Much less often, some of that money will make its way into a long-term wealth-building account.

Some of the short-term and long-term liabilities listed in our example result from this type of spending.

ASSETS  Short Term:  Long Term  Checking Savings Money Market CD's   Life Insurance Cash Values    Mutual Funds    Stocks/Bonds    IRA's / Qualified Plans    Real Estate Collectibles / Art

LIABILITIES  Short Term: Long Term: Credit Cards Mortgage Taxes Car/Boat Loans Rent Insurance Premiums Home/Car/Disabilility/Term Entertainment Estate Taxes Recreation Home Equity Loans Food Impulse Buying

Generally, we define short-term expenses and liabilities as those that are closed as completed transactions in less than one year. Short-term expenses, in particular, can consume a great deal of your available financial resources. Most often these expenditures are used to satisfy temporary desires that offer no long-term gain.

As expenses grow, we often begin to experience real stress. Unless we respond to that stress wisely, we can fall into the trap of settling for short-term remedies that only increase our total indebtedness. Over a period of time, we begin to feel trapped as if there were no escape and no path back to fiscal responsibility.

In this position, it may seem almost impossible to save or invest. Savings, put aside with great care, are consumed to pay over-due obligations or to provide temporary respite from current financial pressure. Even intense and painful efforts to restore financial well being seem to be slow and only limited in success. The further you get out of balance, the harder it is to regain your financial equilibrium.