6 Practical Steps to Managing Your Cash Flow During A Pandemic & Beyond

Practical Steps to Managing Your Cash Flow During A Pandemic

1.  Put away your credit card for 3 weeks

• • • When was the last time you put away your credit cards and only used debit or cash to make your everyday purchases?

2.  What are you really purchasing?

• • By only using debit/cash it provides you with an awareness of what you are actually buying. By using a credit card, it can hide the fact that you are buying things you “want” versus things you “actually” needed
  • People are willing to spend much more with a credit card versus debit/cash – as much as 83% more in some cases * ( 2018 – Value Penguin – Bailey Peterson)

3. The Latte Factor – Monitor what you are purchasing over a 3-week period

• •  By tracking what you are spending you will have a better understanding of where your money actually goes. It is amazing how much we actually spend on coffee, lattes, drinks out, lunch at a restaurant, etc.

4. Develop a budget…and stick to it

• • Developing a monthly budget is probably a challenging task for most people. However, if you are capable of creating a budget and sticking to that budget, overtime, you will see that retirement will be within reach.
  • Pinpoint at least one or two expense you can decrease or slash in half
  • Review the services or products that you are purchasing each month and ask yourself the question – Do I still need it?
  • Sometimes we get into habits and continue to pay for services we no longer need or we could reduce

5. Good debt versus bad debt – restructure your bad debt into good debt – pay off debt

• • Nobody is going to knock on your door and say, I want to buy your credit card debt or I want to purchase your car loan. However, somebody will knock on your door and say I am interested in purchasing your house/condo. So, credit card debt and car loans are “bad debt” and mortgages on a house/condo is “good debt”. And most houses/condos do go up in value over time.
  • If you own a house/condo with a mortgage and you do have a car loan or you are having difficulty paying off your credit card on a monthly basis, look at consolidating your car loan/credit card debt into the mortgage payment. Interest on a car loan/credit card is compounded monthly or in some cases, daily. Interest on a mortgage is only compounded semi-annually.
  • More than 50% of the home owners who have paid off their mortgages have a Home Equity Line of Credit (HELOC) with an outstanding balance. In some cases, the outstanding balance can be in the thousands or hundreds of thousands of dollars. The interest rate on a HELOC is compounded daily….and you might get into a habit of only paying the interest each month and then you are compounded the problem even further because you are not paying down the principle. By having a mortgage instead, every payment has some portion going to pay interest but also some portion going to pay down the principle.

6. Work with a professional Certified Financial Planner (CFP) or Chartered Life Underwriter (CLU) – seek out their advice

• • Get help with developing a monthly budget. Most financial planners have developed their own tools or templates to help clients with the budgeting process.
  • Also, they will have experience with the targets when it comes to budgeting what the actual or potential monthly lifestyle expenses could or should be.