Cash flow management: Preliminary step of financial planning

Cash flow management is the preliminary step for making financial planning. In daily life we never think about our expenses and source of income. But in Corporate houses cash flow is maintained regularly to record their expenses and incomes so that they could control their finance and keep growing in corporate world. Similarly we should not ignore cash flow management and should identify our major source of income and expenditure.

Individuals may have following source of income:

• Business profits
• Interest, dividend from investment
• Salary, bonus
• Rental income

Expenses may include the following:

• Living expenses including food, clothing, Rent, travel & entertainment
• Different kind of taxes and utilities
• Loan EMIs
• Different kinds of insurance premium
• Expenses for child’s education

In order to maintain our finance we should follow cash flow management systems which will eligible us in planning our financial goals. With the help of cash flow management not only we can reduce our expenses but also grow our income level so that we could have adequate fund to meet our financial requirement in future.

In absence of cash flow management expenses may exceed our income level and we may be trapped in financial crisis. Creating a plan is not enough to safeguard our uncertainties unless we implement it in our life to bring about a change in spending habits.
Cash flow management can help you in paying off costly unsecured or secured loans like credit card, personal loan, and home loan and also enable you to identify the areas where expenses can be reduced.
Prior to starting an investment exercise you would need to have sufficient cash which is possible only by having cash flow management systems.