Increase your Free Cash Flow
Posted on Mar 25, 2007 under Financial Literacy, Financials, Personal Finance |I’ve talked before about your personal income statement. The important principle to take from this is the free cash flow. It’s the part of your income that’s left over after you’ve paid all of your living expenses. Most people think of this as their savings, but there can be a little more to it.
This free cash flow is also called our discretionary spending. We can choose to save it, invest it, give it away, or do anything else you like with it. This is the problem so many people have when they rely on credit and spend more than they earn. They deprive themselves of this discretionary income. Everything they earn is already spoken for. You owe it to yourself to have something left over every month and to increase this amount.
Here are the two ways you can increase your cash flow:
1. Increase your income.
This is obvious, but it’s not exactly easy. You can try to work overtime at your current job. You can look for another job that pays more. You could take on a second job during the evenings or weekends. You could start a side business that would bring some extra money in. You can also sell some of the things that you don’t use/need anymore. The most popular site for this Ebay (check out the link on the right). The point here is to find new and creative ways to earn as much as you can.
2. Decrease your expenses.
It’s pretty simple to find ways to cut your expenses, but actually doing it is the tough part. You get so accustomed to your lifestyle, that you don’t want to cut back. If you’re not willing to cut the cable or satellite TV, you may be able to at least find a better price. Perhaps by bundling the services with your phone and Internet bill. You can also shop around for for cheaper rates on your insurance premiums. As you accumulate more savings, try raising your deductibles. Ask yourself if you really need to go to that restaurant, or if the new “iToy” is really a must have. There’s much more, but you get the idea.
Start to think of different ways that you can increase your free cash flow. The next step is to develop a plan for what to do with it. Without a plan for it, you’ll end up just spending it. Spending has a crazy way of inflating to the level of income. Later I’ll talk about what to do with this freed up cash.
Let us know some of the ways that you’ve been able to increase your income and decrease your expenses, and good luck with your free cash flow…
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by Anonymous, on March 26 2007 @ 4:56 pm
1. Stay away from contracts. I have a prepaid cell phone plan with Virgin, which costs me $17 / month. I have no Tivo and my basic cable is free, included in the condo I rent. A/C is included in the rent also.
2. Use the same reward credit card for all expenses, but pay it off in full every month. Through rewards, I get free store gift cards that are used to buy clothing and DVDs. On top of that, you have 25 days to pay the bill, which increases cash flow and allows you to earn interest in an interest checking account. I know the best bank for that account.
3. Subscribe to local newspaper, Sundays only, to get coupons. The savings pay for the subscription and more. You save a bundle just with batteries and razor coupons.
4. Buy Living Cookbook software to organize recipes for the week and grocery shopping. You can save a lot of money and time through this software. I use the Diet Pro version, which includes fitness. www.livingcookbook.com
5. Costco is only good to buy Fish, Meat, organic vegetables, and gasoline. You save money with those items, while the rest just makes you spend more.
6. Use reward points to get $100 Best Buy gift card. Use the card to buy a gazillion DVDs, since this items is a loss leader at the store. I stopped going to the movies and only buy DVDs by using this money saving strategy. It’s much better than rent or going to the movies, plus you can sell those DVDs if you need to.
That’s all for now. I have many other practical and unusual money saving tips, as well as risk management strategies. You won’t find this in books, and they are all have been tested by me, for years, including international opportunities. I love to beat the system.
by frugal zeitgeist, on March 26 2007 @ 7:28 pm
I’ve written a few posts about how to cut expenses. Here they are if you’re interested. If I could find a way to increase my income without leaving my job, I’d be very interested in that.
by moneymonk, on March 28 2007 @ 2:33 pm
….and buy assets and not liabilities
by Fiscal Musings » Blog Archive » Managing Your Free Cash Flow, on January 29 2008 @ 7:14 am
[…] not going to have much cash flow to manage and you’ll need to come up with ways to increase your free cash flow. This can be accomplished in one of two ways: by increasing your income or reducing your expenses. […]