Cash flow and abundance go hand in hand.
You cannot be truly abundant without having a good understanding of where your money goes.
So today, we will be talking about free cash flow and how to manage it effectively.
Cash flow and your money story
Before we go deeper into discussing cash flow, you must first understand how your money story affects it.
Most people would think that free cash flow has a lot to do with the money that comes and goes.
This may be true. However, the money you have on hand has little impact on how much of it you can keep.
If you’ve been reading my blogs or listening to my podcast, you would know that money is neutral.
And our ability to make money is focused on what our relationship with it is.
This is the reason why most people fail by creating positive cash flow. They fail to recognize how money makes them feel.
If you feel scared about losing your money, you’ll eventually lose it.
Feeling guilty about having ambition and wanting to be rich? The money will fall right out of your hands.
Unless you change the way you think and feel about money, it will always stay the same for you.
Common Cash Flow and Money Mindset Problems
Whether it’s an entrepreneur, an employee, or a business owner, most seem to have problems managing finances.
And most of the time, how they handle business is related to how they view money.
These are the three most common personal finance issues people face.
I don’t have much money to save
Most people believe they don’t have much money to save.
Some say their income is too low. Others say they just get a break-even from their business.
But the truth is, most fail to save because they don’t have a good understanding of money and personal finances.
They also choose to prioritize other things instead of creating a savings account.
That’s why they find it difficult to create savings and free cash flow.
I have too much debt
Most people use credit cards thinking it’s an extension of their wallet. It also gives you the impression that you can buy anything you want when you want it.
The problem is, credit cards can be a huge money drain if not used correctly. And most people who use it usually get drowned into debt.
The interest alone can be enough for you to save a good amount later on.
People with debt usually live beyond their means. They also often act on a whim and make impulse purchases.
This behavior almost always leads to more spending and no savings.
But like money, debt isn’t always negative.
Investopedia talks about good debt and bad debt.
Good debts are the loans you take that have the potential to increase your net worth.
On the other hand, bad debts involve borrowing money that depreciates you.
The value of your debt can depend on individual factors. What matters is how you fulfill your duties of paying them back.
I don’t know how to invest
Investing is a huge part of abundance and cash flow. Unfortunately, not everyone has the knowledge or courage to make good investments.
Some people are too scared to let go of their hard-earned cash. Others say the time and the risk it involves is just not worth it.
There are those who think investments are too expensive. And some just don’t know where to start.
Here’s another truth about money. It doesn’t like staying in one place.
When you invest your money for a cause or another person’s business, it has room to grow.
You help create opportunities for others and yourself.
The key is to learn more about the investments you make. You can even get guidance from financial advisors on which investment options are best for you.
Cash Flow Analysis and how it works
Business owners and entrepreneurs would understand how important cash flows statement and cash flow analysis is.
For starters, it shows you how money flows in and out of your business. The cash flows statement measures how well your company manages cash position.
It also shows how well you generate cash to pay for obligations and operating expenses.
Like any business, you should also understand how money and abundance flow into your life.
You need to become aware of the blocks that stop this flow to remove it. Without awareness, it will be difficult to accept and change for the better.
Like you, I’ve also experienced how it is to lack money and cash flow.
It’s a bit ironic to think that a money mindset expert had trouble with creating money.
Back then, I was frustrated because no money was coming in.
It’s not that I couldn’t do it. After all, I became a millionaire before hitting 30.
But with all the negative things happening to me at the time, I felt like the money just wouldn’t come.
So I stopped and thought about what I was doing wrong and how I was going to fix it.
I did my own version of cash flow analysis and made it work for me.
Three Steps to Cash Flow Mastery
I was at the lowest point of my life.
My husband was cheating on me with a nineteen-year-old woman. I had two kids to feed with no money in the bank.
I was a property millionaire and it disqualified me from getting assistance and benefits from the government.
The only money coming to my account was for my children.
I was frustrated and in despair. And I felt like nothing I did to make money was working out.
So I stopped and thought to myself, what can I do to make it better. That’s how I came to design this three-step cash flow mastery process.
Here’s what you need to do.
What do you feel about money?
First, you need to figure out how money makes you feel.
Do you feel guilty about having it? Are you angry if it leaves?
Is there any embarrassment or frustration whenever you talk about it?
These emotions you have around money tells you about the kind of relationship with it.
Once you become aware of this, it will be easier to reframe your perception of money. It will also be easier for you to take control of your response.
Start five bank accounts and assign labels to them
Now you might wonder, why five accounts instead of one? It helps you know where your money goes.
Here are the labels you should be using for each one:
- An account with your name – this will be the money you use for fun personal purchases. This removes the guilt you may feel for giving in to the things you buy to keep you happy
- An account for large purchases – this is the money you’ll use to make large buys like a house, a business, or anything that will take you six months to save up for
- An account for charity – this account is your giving account. You can use the money here to give back to the community or a cause of your choice.
- An account for debt/investment – this helps you pay for any outstanding debt. Once the debt has been cleared, you can now save up for investments and
Don’t have an account yet? No worries. You can use envelopes with this method as well.
What’s important is the habit you’re creating and tracking where your money is supposed to go.
Pay each account at least 1% of your pay
Remember what I said about saving being a priority? This is where it comes in.
The golden rule is to save at least 1% of your cash on hand for each.
So for example, you have $100 on hand. All you have to do is put $1 on each envelope. Then you’ll be left with $95 to spend on your essentials.
If you think about it, $5 isn’t much. But it makes a whole lot of difference, especially with the mindset you have around money.
This will also develop a conscious mindset about saving, decluttering and attracting abundance in your life.
As you get more opportunities, you can eventually increase what you set aside to 3%, then 5% until you get to 10% or higher.
Next thing you know, you’ll clear your debt, you get a better relationship with money, and you’ve got money to share and spend on yourself.
Mastering cash flow isn’t as hard as you think.
To get started, all you need to do is identify how money makes you feel. Then develop a good cash flow analysis and system to maximize your money.
To learn more about how to master cash flow, listen to my podcast here.
Ready to change your money story?
Change your money story with our Five Day Millionaire Mindset Makeover Challenge.
Join the waitlist here: https://gullkhan.com/gull-khan-money-mindset-expert/mmm-challenge/.