Welcome back to Ask Abby, our show where we discuss everything you need to know about finances, whether you’re thinking about retirement or trying to get through a recent job layoff, we have a show just for you. Today we are talking about cash flow. 5 ways to get your cash flow problems in check. We aren’t talking about skipping the Starbucks line today, we are talking about real-deal problems that many people have – and don’t realize they have – with their cash flow. So, stick around for a deep dive on some tips and tricks for cash flow. Plus, we have a sneak peak of a new tool on our website that breaks down your cash flow into a super simple way. You won’t want to miss that.
1. You’re spending most of your money on rent
It’s not uncommon to hear that 30% of your income should go to rent. ⅓ of your monthly income. So if you make $2400 a month, spend $800 per month on rent. Is that true? The answer is, I don’t know. Why? Because there are so many other variables that play into your rent payment:
- Where you live
- Where you work
- Your other bills and debt
Generally, 30% is a good place to start. Break down your income and current expenses, and see If you’re spending more than 30%. If you’re spending 50% of your income on your rent, it’s probably pretty tight every month and you should look, if possible to move. Right now, property managers are looking for reliable tenants that can pay rent. So, start looking and see if you have an option to save a couple hundred dollars.
If you’re having trouble paying your rent payment, we are talking about that in an upcoming Ask Abby episode so make sure to follow our page and sign up to get notifications when we go live!
2. Your car payment is $$$$
Before we dive into that, I was to just remind everyone about our shows the last couple of weeks. We talked a lot about $$$ and cars. So,
If you have a car, watch this video about refinancing:
If you have a car and can’t make your payments because of COVID-19, watch this video:
If you don’t have a car but would like to buy one someday, watch this video:
How much should you spend on your car? ~10% of your income is the general rule of thumb. This includes the expense of car insurance. If you don’t drive much, which right now, most of us don’t, ask yourself if the car you have is adequate for what you use it for. What’s your interest rate? Is the car reliable and is it worth more than what you owe?
After you answer these questions, decide if you can find a car that will save you a bit of $ and still get the job done. If you sell your car and buy something less expensive, but equally reliable, you might be able to lower your car payment. Also look into your insurance. You might be able to save there as well, at least that’s what all insurance commercials have us believing, right?
3. You have a lot of debt
I like to consider our coaches debt experts. So rather than diving into the nitty gritty details of your debt and how much you owe and what to do next, just call our coaches. It’s free and we don’t try to SELL you anything. The goal is to analyze your finances, your various debts and we provide you with options and let you take it from there.
Got debt? Go to: creditanddebt.org
Those three major categories, auto home and debt are usually the problem causers when it comes to issues with cash flow. I want to know, are those the costs that are burdening you lately? Do you agree or disagree with me? I want to know, especially if you disagree with something.
So, before we go any further, I want to show you that SNEAK PEAK I was talking about.
Share screen with cash flow breakdown tool
These aren’t anyone’s real finances, just an example of how they might work, so if your finances don’t look like this, don’t be concerned. Just as an overview of the tool, once you sync your bank account, this all populates for you. So no manual budgeting breakdown needs to be done, which is a great way to simplify it. Plus, we customize your recommendations and you can just call a coach right from the page to chat through any question you might have.
The tool tries to line up your 7 or 8 major expense categories relative to income and look at the problem
33% for rent
10-11 for car
If your rent is 40% of your income and all of your major expenses are 70% and you haven’t eaten, does your Starbucks trip really matter?
4. You don’t pay yourself first.
This isn’t always possible, especially the common recommendation to save 20% of your income. But, make a reasonable goal. even if it’s $20 per month, always set up some sort of auto-payment to a savings account. Start somewhere. This is where we talk about Starbucks. If you have problems 1-3, skipping the Starbucks line won’t make much of a difference. But, if you’re comfortable with your cash flow breakdown and are ready to make some smaller changes, this can actually be helpful.
Stop right here, look at that number for food/dining, and dive in a little deeper. If you’re bank statement charges look something like line item restaurant, restaurant, coffee, ice cream, restaurant, coffee, coffee, (tag your friend, you know who your are.) and grocery store is nowhere to be found or you spent $20 on laundry detergent and called it grocery shopping, you can probably save some money here and start paying yourself first.
5. Having too many open accounts.
We talked about debt potentially being a problem so what’s the difference between debt and too many accounts? Why is this a problem? Because you can’t keep track of everything. Store cards, various credit cards and travel cards, gym memberships, streaming subscriptions, all take away from the big and essential line items that we’ve talked about like car payments, insurance, rent, student loans, retirement, and existing debt payments.
SIMPLIFY your finances.
We did a video on this. Watch this video to simplify your finances: https://www.facebook.com/creditanddebt.org/videos/703394243797791/
Before you know it, if you have too much going on, you’re spending more on your subscriptions than you are on your car insurance or you don’t even know how much all this is costing you – that’s a definite cash flow problem.
That’s our show today guys, we talked about 5 major cash flow problems, 1. Pay too much for rent 2. Your car payment is too high 3. You have a lot of debt 4. You don’t have savings 5. You have too much going on to track it all.
If you have questions or thoughts on all this. You agree or disagree with anything I said, I want to know. Especially if you disagree, we want to hear from you. So, you can comment on this post, please hit that like button. If you like and share our stuff, we benefit because more people see it and you benefit because if you really do like it, you’ll see it more often. You can also email me at email@example.com, go follow my FB page, ASK ABBY, subscribe to our YouTube Channel and opt to get notifications on FB when we go live at 12:30 pacific on wednesdays! As always, thank you so much for tuning in and we will see you next week on Ask Abby.