Part 4 of our Back to Basics series.
Cash is the root of the financial goals that we set. How’s that for a blinding flash of the obvious! More specifically, cash flow is the blood that brings life to your financial goals.
The biggest problem is a lack of clarity regarding your cash flow. You may not know where your money is going, or if it is enough to make progress toward your goals. Symptoms include overspending, under-saving, and the absence of a cash flow plan. You end up stuck, overwhelmed, and without direction in the pursuit of your goals. The tragedy is that the problem can usually be resolved with a little direction and structure.
It is hard to pursue your financial goals when you feel like your resources and work are not being directed to supporting your dreams. Although we see this situation a lot more than we would like to, we also get to experience the break-throughs where people are confidently loving toward their long-term goals through a disciplined and consistent approach.
The old saying “cash flow is king” is so true, but let’s take it one step further through the following simple formula, assuming that you are redirecting your abundance toward your goals:
Progress toward financial goals = income – spending
There are many potential outcomes to this formula:
- By reducing your spending, you are increasing the amount that could potentially go toward your goals.
- By increasing income, you are also increasing the amount that could potentially go toward your goals (assuming that your spending remains the same).
- If spending exceeds income, your upkeep will be your downfall!
Now if you really hate formulas, the basic message here is to spend less than you make and have a plan to work toward your financial goals (this part is also important because when we don’t have a plan for our excess money, it usually disappears).
We have a cash flow calculator that you might find very useful in your journey. Click here to calculate your cash flow.
Progress toward your financial goals is fueled by your cash flow. The worst response is to not be aware of it. You must respect cash flow as the most important factor in achieving your financial goals.