Know Your Cash Flow
What’s “Cash Flow”? – Simple: It is the progression of your account balance over time. Keep in mind that we’re not talking about “your account” as “your bank account”. In other words, Cash Flow determines the amount of real cash you can have available to you at any given day of the month, year or life.
Why is cash flow important? – Because it is the amount of money that you can spend at any given time without going into
debt. This means that, if you are at the end of the month and you have $100 in your pocket and $0 in your bank account, you can pay for stuff that costs up to $100. If you’re banking on the next paycheck and paying with a credit card, your over all account balance goes to a negative value as soon as you spend more than $100. And it even goes to a negative
amount if you spend less than $100 on your credit card and spend the $100 in your pocket on something else.
So why is a negative cash flow bad? – Because it indicates that you’re living beyond your means. Or to say it bluntly: you are spending
more money than you have. Sure, there are many excuses: Oh, it’s just this one time. Oh, by the time it hits my account I’ll have enough balance to pay it off. Oh, it’s such a great offer that I’d
lose money if I didn’t buy it now … The fact of the matter is, you have just spent more money than you have at this particular moment. Always remember:
When you go negative someone else will make money off of you. They will
charge you interest, late charges, finance charges, overdrafts,
administration fees, return check charges and much, much more. All these
extra charges make the items you purchase more expensive for you.
Copyright (c) 2008 by In Scope-Solutions,