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Tuesday, March 9, 2010

Cashflow Reminder

This post is just a quick reminder for myself (and my loyal readers) on the three potential ways to increase your cash flow from paycheque to paycheque. Everyone wants their financial life to be easy, and there are three options to do so.

1) Make more money: to do this you either to make more money at your current job, or find alternative ways to make income. If you have a job where you can get bonuses, are you doing enough to get the maximum bonus. If you aren't, ask your boss what you can do to be more effective. If you are in a union, are you at the top of the pay scale? If not, what can you do to get there. Can you work overtime? If not, what can you do to earn some extra cash in your spare time. For myself, I am taking courses to get myself to the highest level for my job, and tutoring on the side to make some extra cash.

2) Spend less: the other easy way to have more cash flow is to spend less money. You can do this by trimming your fixed expenses (find somewhere cheaper to live, cut down/out television/internet), cutting down your variable expenses (trying to go out less, or limit your free spending in a paycheque, or shopping around before you buy something), or go on a budget. A budget is difficult to work with, but for myself, I use the "bucket" technique, where I have a set amount of money set aside for groceries, spending, holidays, house maintenance, etc. coming out of each paycheque which physically goes into buckets. When I run out of cash, I stop spending that month. Another tool that I use is to not bring my wallet or credit cards/debit cards with me when I shop. If I only bring cash with me, it is impossible to go over in my spending. At school each day, I know that I am weak so I leave my wallet at home.

3) Have no debts: Easier said than done, but imagine if you didn't have a mortgage, or a Mastercard bill, all of the extra money that you would have. We all have these dreams, so to improve our long term cash flow it is always in our best interest to minimize our debt. Our goal should be to be debt free at retirement, but for myself I will be debt free as soon as possible. Right now a large percentage of my paycheque goes towards student loans, mortgages and personal loans. If I didn't have those loans, my paycheque would go to exciting things like RRSPs and early retirement, or a new house.

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