Determine your Cash Flow - Part 2 Analyzing and increasing your cash flow. By Mo2

If you haven't already, please read Determine Your Cash Flow - Part 1 so that this article makes more sense.

Expense Reduction
One step to increasing your cash flow is by reducing your expenses. Unless you're perfect we all makes some questionable purchases. Like myself, I bought 8 boxes of contact lens last month and I just found out you could buy them online for significantly cheaper! I've learned my lesson and that's nearly $50 savings for next cash flow statement. Take a look at your cash flow statement and try and pick out some items that you know you can reduce. Really people, you don't need a Decaf Double Tall Non-fat Vanilla Latte at Starbucks 4 times a day. Geez.

Debt Reduction
Putting 10% of your income into savings is great but not so if you're putting 15% of your income on credit. As a general rule, always pay down your debt before you save. Why? Well, have you looked at the APR (Annual Percentage Return) of your credit card? It's often hovering around 18-19%. I don't know about you, but I'd be pretty happy with a 18-19% return annually on my investment portfolio. You're looking at doubling your account every 4 years or less with that return.

I hope I'm making this obvious to you. Not all your debt may be credit card related, your bank loan may be only 6% who knows, but debt is expensive and the more you hold off in paying down your debt, the more trouble you could be in financially. Before you start saving always pay down your debt.

Increase Your Income
I'm not going to tell you how you could irritate your boss every 15 minutes to get a wage increase but there are ways to increase your income. Pay raise would be the obvious answer, after time if you're doing a half-decent job, and I hope you are, then you'll most likely get a pay raise over time. Now, just because you just got a $200 monthly pay raise, that doesn't mean you could spend an extra $200 on an expensive pair of Manolos. I know ladies, very hard to resist, I could use a new guitar amp too...Ahem, back to the point at hand.

Review your Portfolio
Those of you that have investment portfolio might want to review what you have in that portfolio. If you have 90% of your portfolio all in a savings account with a 3.4% annual yield you should be looking elsewhere to enhance your return. I'm not saying that savings accounts are bad but you need to think about asset allocation, which could lead to great portfolio return and help you make the most of your money. Always study what investment options are available to you.

Conclusion:
The Cash Flow Statement is a vital part of your financial planning. With this powerful tool, you can figure out and pinpoint your spending habit problems. Once you know how much your monthly cash flow is, you can begin setting goals that you know will be attainable as long as you stay on top of your cash flow. Always try to increase your cash flow as this with lead to great financial health.

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