Your personal finances: Do they put you in the black or the red?
17 January 2017
Posted by Equus Partners
In a previous article we talked about how creating a budget can help eliminate cash flow problems in your business. But what about your personal life? If you always seem to be short of cash, a personal budget may be just what you need.
Now we understand how phrases such as “profit and loss statement” and “cash flow forecast” would be enough to put you off the idea. So let’s forget about those, and use a much simpler term.
Introducing the Net Cash Figure.
Let’s say that at the beginning of the month you check your personal bank accounts. All-up you have $20,000 saved in various accounts, including:
- the offset account against your loan
- a number of saving accounts
- a simple transaction account.
This amount is your Net Cash Figure.
For the next month, life goes on as normal. You (and possibly your partner) will earn a wage, and you may also earn money from your investments. You pay the bills—food, utilities, insurance, the mortgage, and so on.
And then, at the end of the month, take another look at your accounts and compare it to your Net Cash Figure at the start of the month.
Red or black?
If the amount you have now is higher than your Net Cash Figure at the start of the month, congratulations: you’re spending less than you earn, and you’re in the black. But if it’s lower, then you’ve spent more than you earned, and are now in the red.
Now, repeat the process for a few months (making each month-end amount your Net Cash Figure for the next month), and see if there’s a pattern.
Are your personal finances in the black most of the time? Fantastic! You should start looking at how to use this ‘surplus’ to create additional wealth by investing, paying more off your mortgage, etc.
But if your finances always seem to be in the red, then you need to take action. And quickly.
How we can help with your personal finance
At Equus Partners we have some fantastic strategies and tools that can help you:
- understand your Net Cash Figure
- get your personal finances back in the black
- use your personal cash flow profit to create financial freedom for you and your family.
To find out more, get in touch with us today.
Because when it comes to your finances, black looks so much better than red.