There are many tools that we can use to increase our wealth, but one of the most fundamental tools is finding and saving cash. One of the imperative secrets to building wealth is increasing and saving cash flow. Besides the income we earn, this extra cash can be used to add to savings or be put into investments to increase return. By tracking spending and being calculated in your financial choices, you can find more cash flow and increase your savings day-to-day. Here are a few tips to improve your personal cash flow:
Mind Your Everyday Spending
Increasing your cash flow can be as simple as focusing more on finding extra cash from your everyday life and increasing your savings. It’s easy to fall into the trap of forming bad spending habits, using your entire paychecks, and having nothing left over after paying your necessary expenses.
By minding your spending in small increments – whether it’s monitoring it on a daily, weekly, or monthly basis – and creating a budget that involves stashing away a mandatory amount of cash to remain unused at the immediate moment allows you to increase your disposable income that can be used as cash flow. These achievable action items can include opting for cheaper groceries, cooking at home rather than eating out, or even sacrificing a few subscriptions. By logging where your money is going, you can easily see where you might be overspending and what unnecessary expenses you can cut.
Most people have a debt of some kind, whether it be credit card bills, student loans, and more. By paying off your debt, you are allowing yourself more disposable income to contribute to your cash flow. Once a debt is paid off, you’ll free up that amount of cash you put towards your scheduled payment. Moreover, once you put that extra cash flow towards other debts, you’ll accelerate your debt payoff, allowing for more continuous cash flow moving forward.
Some of the best debt payoff strategies are debt avalanche and debt snowball methods. In the debt avalanche strategy, you tackle debts with the highest interest rates first, allowing you to accrue less interest over time. In the debt snowball method, you’ll be paying the smallest debts first. By prioritizing the debts with the lowest balances first, you’ll reduce the number of outstanding debts more quickly and allow yourself small wins to check off.
Benefit From Income Taxes
Income taxes have a significant impact on your earnings and cash flow, as it reduces the amount of money you take home paycheck to paycheck. However, there are a few tax strategies that you can utilize to make taxes work for you.
First, you can save as much as you can in your company offered 401(k) or other defined contribution plan. Many employers will match your contributions, so don’t miss the opportunity for free money. After this plan is filled up, you can also contribute to an individual retirement account. Work with an advisor to determine which IRA makes the most sense for your financial situation and goals.
Another strategy is to work with an advisor you trust to develop other tax strategies based on your current tax situation to save more tax dollars and add to your cash flow. For example, charitable contributions and certain business expenses can constitute write-offs, allowing you to save from your taxes.
Understanding and Applying Compounding
The concept of compounding and utilizing it as often as possible allows your money to grow at an exponential rate. Compounding is essentially the process of investing, earning a return, and reinvesting that earning to increase your overall returns over time. In simpler terms, compounding allows money to grow money.
Increasing your cash flow and having the leverage of more disposable cash to put towards investments will allow you to compound your earnings over time, ultimately building more wealth. Working with a trusted advisor can help you to determine which investments are right for you and can provide the greatest returns, putting your cash flow to good use.
Work With a Trusted Financial Advisor
Throughout all your financial planning and wealth management endeavors, it’s helpful to work with a professional who can guide you every step of the way. A trusted advisor can help assess your current financial standings, create achievable budgets, pay off debt, and create investment plans that allow your increased cash flow to work towards your financial goals.
TrueNorth Wealth is one of the leading Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money now.