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Cash Flow Budgeting – Part II

Cash Flow Budgeting – Part II

Cash Flow Budgeting – Part IIIn Tuesday’s post, Cash Flow Budgeting – Part I, we introduced the idea of cash flow budgeting and two steps—automating your savings and paying your needs and priorities—to support it. Today, we’re sharing the final two tips below:

 

3.) Spend the leftovers

This message may sound peculiar for personal finance advice. Remember, though, that you've already automated your savings. What you're spending here is the leftovers - the extra that's left at the end of the month. 

You can choose to spend this money however you like - don't worry about putting this much in entertainment and that much in travel. Just keep track of how much you've spent so you don't accidentally overdraft your account.

This approach allows you to go out or indulge in a latte. You don't have to worry about including it in your budget. Your spending habits might change as the month goes on, just like a business. If you know there's a big outing before you get paid again, you may want to save some money for that. You don't need to say that you can't go because you didn't budget for it. 

4.) Roll over what's left

If you've worked in a big business, you've seen departments desperately spending at the end of the fiscal year. Departments buy cases of pens and paper, knowing that they'll lose whatever they don't spend. Fortunately, you're choices are more flexible than a big business. You don't have to spend it all. If you have money left over at the end of the month, then you have more to spend or save the next month. 

If you have a month with slightly higher expenses, you can cover it from a previous month's slightly lower expenses. Your spending will change from month to month, as might your income. So long as you keep the former smaller than the latter in the long run, you'll be fine.

That's what cash flow budgeting is about: flexibility. You don't have to write your unbudgeted spending purposes in stone. You don't have to mess with cash envelopes or other strategies. You can spend when you have money and save for when you don't.

 

For more information on cash flow budgeting, consider reading Biz Finance’s post, “Cash Flow Analysis” and “How I Track My Money and Still Save…” on moneyning.com. PrimeWay also offers some great tools to support budgeting, including financial calculators, on their Tips, Tools and Resources page.