People think successful investing is the hardest part of building wealth but for my part, I think attaining proficiency in cash flow management is a much more difficult activity to master.  Part of making the journey easier is having a bank account system that works well for you.   I’ve already explored that topic so this article is going to concentrate on strategies you can implement that increase your success rate in managing your coin.

Identifying And Controlling Spending Habits:  it can be exceedingly difficult to control all your money if you don’t know where it’s going.  EFTPOS in this respect will be your undoing.  It’s too easy to whip out your card and put it through a machine thereby deleting money from your account.  Somehow buying things with plastic doesn’t seem to have much significance to us anymore.  Furthermore, if you use EFTPOS, your spending will always be out of alignment with your cash flow management plan.  This is because you won’t realise how much you are spending by using your card until you get to the end of the month and complete a review of your bank accounts.

Given the above, if you truly want to gain control of your money you need to ditch the EFTPOS card and change the way you spend your hard-earned coin.  An alternative to using an EFTPOS card, is to use cash.  Retro I know but the method works.  Visit the money wall and take a certain amount of money from the cash machine each week, put it in your wallet and use only that cash to buy your coffees, lunches and movie tickets, etc.  Collect your ‘fun money’ on the same day of each week from the money machine.  By spending cash, you’ll develop an awareness of just how much money you have in your wallet each time you buy something.  You’ll start to change your spending habits and your mindset.  If you follow this tip, it’s likely to have a physiological effect of curbing your spending which ultimately aids in attaining your financial goals.

For those who refuse to follow this tip, at least write down in a notebook what you spend your money on.  Do this for a whole month.  You’ll then be able to review where your coin is flowing to, which should help you identify and change your spending patterns.

Scrap Restrictive Cash Diets:  We can start off doing well matching our actual spending with what we have put in our cash flow management plan but then fall off the cash flow wagon so to speak.  This leads us to being particularly hard on ourselves.  We react by becoming severe in our spending habits, not providing for discretionary spending like movie tickets and lunches out for example.  A restrictive cash diet never works in the long run, however.  If you clutch the purse strings too tightly you’re likely to splurge at some time.  Overall, try to strike a balance and create some wriggle room in your cash flow management plan for treats.

Trim Expenses:  A benefit of completing a cash flow management plan is it enables identification of all your expenses.  This permits you to make decisions in relation to trimming unnecessary expenses.  TV services such as Sky, Netflix and cable, subscriptions to magazines and the daily buying of lunches can easily be scratched if you so choose.  Trim and cut where you can so you realise your financial goals quicker.

Eliminating Debt:  When I review an individual’s cash flow, frequently I find its debt that’s limiting their financial progression. This is not surprising as many people live on credit.  It doesn’t matter if it’s a student loan, an unsecured personal debt or a credit card debt, it robs you of financial progression.  In some cases, it even attacks motivational levels as people struggle to see an end in sight, where their debt is cleared and they are able to begin building their wealth.  If you fit into this camp, don’t despair.  There are strategies for effectively dealing with debt repayment which I’ll explain in future articles.

Pay You First: I am utterly amazed at the vast number of people who work all month, every month, for years on end who never, ever regularly pay themselves. What I mean by this is they fail to take their pay in the form of savings and this is despite the fact they’re in a financial position to do so.  Rather, they pay money to everyone else and then try to save from what is left over.  Consequently, they never build up much in the way of an emergency fund or a savings account balance because there is never anything left after they’ve shelled out to others.

To avoid this situation, ensure you pay yourself immediately after you receive your income.  Put the entry in your cash flow management plan.  Set up your accounts as I’ve explained in my previous article.  This will see funds from account 1 automatically go into accounts 3 and 4 each time you receive your wages/salary.  It doesn’t matter what the amount is.  Consistency is the key.   Remember you’ve worked for it –  you deserve it more than others.

Distinguishing Wants From Needs: Years ago I had the privilege of working for a very poor woman who had received a share of a lottery she’d entered with her workmates.  This woman worked in a dairy during the day, cleaned a school after working hours and then worked as a caregiver on the weekends.  She had a young son and managed her wages exceedingly well.  She knew the difference between ‘want’ and ‘need’.  Those however who have a little extra funds and in some cases those that don’t, are often unable to distinguish between a real want and an absolute need.  Lack of distinguishing sees notes flying out of wallets and credit cards whipped through machines quicker than the speed of light.  Money is spent on ‘nice to haves’ thereby threatening the achievement of financial goals.  If this scenario sounds familiar, make a list of the things you need to buy before setting out for the shops and stick to the list.  Put your credit cards on ice and leave them at home.  Better still, avoid the shopping malls altogether for a period of time.

Establishing Your Personal Priorities:  When we review our spending, we can find we spend money on inconsequential things.  This spending takes us away from what we value.  In other words, there is a lack of congruency between our spending and our values.

I have fallen into this trap.  I used to buy lunch on a regular basis, spending about $45 a week on sandwiches and cakes.  That’s a whopping $2160 a year!  I have a goal to visit New York and want to save as much money as possible and I have one year to do it.  Once I reviewed my own cash flow management plan and identified this unnecessary expenditure I cut my spending immediately.  I now visit my local supermarket on a Sunday afternoon, buy ingredients and make and take my lunch to work.  As I’m eating my home made lunch at my desk I think of the wonderful trip I’m going to take in to the Big Apple with all my saved ‘lunch money’.  Small cumulative changes can make a large difference over the course of time.

Completing my cash flow management plan and reviewing my spending enabled me to make a change so now congruence between my spending and my priorities exist.  In effect, my personal priority is in alignment with my behaviour.

Mindset Is Everything: Have you ever noticed that getting up at 6am for work on a wet wintery day is hard going but getting up at 6am on a miserable cold day to board a plan for a holiday is easy?  Just think about that for a moment.  Before we even get into our car to drive to work we’re stressed.  “The traffic’s going to be bad and it’s going to take an age to get anywhere” are common thoughts we’ve all had on a rainy day.  You don’t think like this however when you’re heading to the airport.  Rather you’re musing on how much fun you’re about to experience.

This begs the question of why do we have such different thoughts and emotions when the situations we’re facing are identical?  The time we get out of bed and the weather conditions we’re exposed to when driving, are exactly the same.  What differs is the Mindset we possess.  In the first instance, our Mindset isn’t that happy about driving to work to complete a full 8 hours of work.  In the second instance however, our Mindset is the exact opposite.  We’re really excited about driving to the airport to embark on a much longed for holiday.

Ultimately, the difference in our Mindset subconsciously leads us to exhibit different behaviours despite the fact we’re dealing with the same conditions.  What does this have to do with managing your cash flow?  Well, our Mindset can sabotage our ability to manage our cash flow and attain our financial goals.  Remember, our Mindset is more often than not, made up of beliefs others have, which we’ve willing and subconsciously accepted over time.   In relation to the beliefs we hold about money and wealth, our beliefs originate and are influenced by our race, culture, gender, upbringing, education, peer groups and experiences we’ve personally had and even those experiences we’ve seen others have.

If we can understand what shapes and influences our beliefs, we can determine if those beliefs are our own or if they are those we’ve subconsciously adopted.  We may well have been living in accordance with the beliefs others have, which have limited us from achieving our financial goals.  Once we identify this, we can determine if those beliefs serve us or not.

If we find those beliefs are limiting and not relevant to us in the world we live in today, we can change our beliefs, thereby changing our Mindset.  This change in Mindset can lead us to engage in new behaviours which empower us and move us towards the financial future we want.

Summary

The relationship we have with money is enduring.  It runs with us, throughout the whole of our life.  We can’t write that relationship out of our lives, so we’d best set the rules we want to conduct it by.   The bank account system I’ve previously shared, together with the tips in this article, will help you gain control of your coin and manage your dollars in ways that best serves you.  Here’s to happy money relationship building.