To effectively manage cashflow, you need to know where your money is going. Once you know what you’re spending (and where), you can then modify your behaviour to increase your savings.
A cashflow budget is an essential part of any financial plan. It helps you understand what cash will be available to meet expenses over a certain timeframe, usually 12 months.
It allows you to:
- Highlight where you’re spending money
- See what proportion of your income is being spent
- Identify areas of unnecessary spending
- Determine the expected flow of cash
- Plan for those months when additional funds are needed
Just as important as creating a cashflow budget is reviewing it – regularly – because external events can always crop up that will not be in line with what you planned for.
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