Cashflow Management: How to Manage Your Money

By MicaR | Online Venture | 22 Apr 2024

Money management skills are required to improve your personal finance. You make a good Cashflow Management: How to Manage Your Moneyd amount of money but if you don’t know how to manage your money, you will never be able to manage your personal finance. Money management means using your money in a proper way. Money management skills will help you know how much money should you use for your necessities, wants, savings, and investments. Money management means managing your cashflow. Managing cashflow means managing your income and expenses.

How to Minimize Your Liabilities?

In order to minimize your liabilities, first of all, you need to understand the different types of liabilities and how many liabilities you have for each category.

Liabilities are basically categorized into three types:

Current liabilities

Non-current liabilities

Contingent liabilities

Current liabilities are short-term liabilities. Short-term liabilities are the liabilities that you should pay within one year. Some of the examples of short-term liabilities are payable interest, income, bills, bank account overdrafts, accrued expenses, short-term loans, etc. that are due and payable within one year.

Non-current liabilities are long-term liabilities. Long-term liabilities are the liabilities that you should pay after a year or more. Some examples of long-term liabilities are payable bonds, long-term notes, deferred tax liabilities, mortgages, capital leases, etc.

 Contingent liabilities are liabilities that may be payable or non-payable according to the outcome. For example, you have a court case, and if you lose you will have to pay money (a liability), if you win, you don’t have to pay (no liability occurred).

Some liabilities cannot be avoided for example Contingent liabilities, however, some liabilities can be entirely avoided for example most of the liabilities under current liabilities and non-current liabilities can be entirely avoided if you work hard, make money, save money, pay your debt immediately, do not buy liabilities, and start buying assets or investing.

How to Manage Your Money?

Do you know the best money management tip you need to follow?

Well, downsize your life?

Downsizing your life means cutting your unnecessary expenses and cutting your liabilities.

By cutting your unnecessary expenses you stop spending money on something that you absolutely don’t have to. For example, why do you have t go to bar and drink two bottles of beers every Friday? Beer does not do good to your body and you can other things to spice up your life instead of drinking beer.

Cutting your liabilities means you stop spending money on things that will increase your expenses. For example, a car will increase your liabilities as you need money to maintain your life. If you need a car in any case, why don’t switch to electric option because it is cheaper to maintain an electric car?

Downsizing your life also means getting rid of all unnecessary things. For example, you have two cars and you can sell one of them, or even sell both cars and buy a smaller car that can save you money.

Downsizing also means you unsubscribe from every subscription service you do not use much. For instance, do you really need to subscribe to Netflix and Amazon Prime at the same time?

How to Manage Your Money Through Multiple Income Sources

You might be making a good amount of money from your current job and maintaining your lifestyle easily. But do you think you can continue to make good amount of money and maintain your lifestyle? You never know what will happen in the future, you might lose your job, you might experience pay cut, anything can happen. Therefore, you should never stay with a single income source.

The most important lesson you need to learn about money is learning how to manage your money through multiple income sources.

You can generate income through multiple sources, you can start investing, or you can start doing side hustle.

If you have money, you can start investing in stock market, real estate, equity, etc. These assets will not only built you a regular income but also build you a fortune when you sell your assets in few years time.

You can also start working on other things in your spare time. For instance, you can drive for Uber, or start selling on eBay, can do freelancing, offer handyman service, start your own online business or start an offline business. The scope is unlimited.

How you manage your money is as important as how much money you earn. Money management means managing your income and expenses.

What is Financial Literacy?

Financial literacy is very important to managing your household finances. Financial literacy does not require you to have a degree in economics and finances, financial literacy actually means you have knowledge of money management and you have the skills to manage your finance. Money management means you can use the money you earn in the best possible way, you are able to save some percentage of your income, you are able to invest your money, and you are able to make compounding profits from your investment. Managing your finances means you know how to balance your expenses according to your income and also manage to save some money at the end of the day. Managing your money means you know where you should be cutting your expenses, how you can build your saving, and how you build your income through the rule of compounding interest. You should always stop spending, and use your money to make money for yourself.

Do You Need to Become an Economist to Manage Your Personal Finances?

In order to manage your finances, you need financial literacy. Financial literacy means skills to manage your money. This leaves a burning question.

Do you need to become an economist to manage your personal finance?

Well, the truth is you do not need to become an economist in order to take control of your personal finances. You don’t need to study economics in college and university to learn how to manage your money.

What you need is knowledge and skills to minimize your expenses, and maximize your income; knowledge on when to invest, how long to hold your investment, and when to sell your assets.

Do you need to become a financial genius to become an investor?

Well, you don’t have to become a finance genius. Investing is all about putting the right amount of money into the right asset at the right time. You can build your net worth through investment even when you are not a finance guru.

Role of Banks in Managing Your Personal Finances

Banks can help you to manage your personal finances. For instance, if you have $1000 in your pocket, you will spend the money because you will be always in need of something. However, if your $1000 is in the bank, and you need to withdraw to spend, in most cases, you will avoid going to the bank to withdraw the money so that you can spend. When you avoid spending, you will of course save some money. Likewise, banks will also give you interest on your deposit. You can keep your money in a fixed deposit account so that you can earn a higher interest rate. When you are earning higher interest rates on your deposit, you are actually profiting from your investment. banks can also help you in a digital transaction. You can start using a mobile banking or banking app to send and receive payments, which will limit your cash usage. When you use banks for receiving payments from employers and paying your creditors, it will be easier to track your transaction, you will understand how much you are earning and how much money you are spending. I use bank accounts to handle my funds and it is really helpful.

How Do You Get Financial Security

Based on my experience, I am sharing the pros and cons of a job versus freelancing.

Job gives you financial security, however, jobs also limit you from earning more. When you are positioned on the job, you have to abide by the job contract and cannot work on a side hustle. Regular jobs will hardly allow you to do side hustle. However, as a freelancer, you can work on multiple jobs and build multiple income streams.

When you have a job you cannot explore other things, you will have to do what you were hired for. But as a freelancer, you can explore a lot of things. Freelancing helps you to reinvent yourself. You will never know your true potential until you challenge yourself to do something new.

If you are looking forward to working a stable job, if you want a long-term job, if you want financial security, if you want a good retirement plan, a government job is the ideal choice. However, if you do not see yourself working for the same job for a long time, if you want to constantly change your profession, and if you are always looking forward to lucrative prospects, if you do not have nat preference for a retirement plan, private jobs will be a better option. 

Government jobs are high paying, however, you will have to commit to long-term work. You might have to work for at least 20 years before you can get the benefits. A lot of people get bored by working on the same job for the long term.  Unless you are working for big companies, corporations, or international agencies, private jobs are never high paying. You will have to work for peanuts. Another drawback of a private job is you might also suffer from bully and harassment by your employer which might lead to mental health issues. You will also be constantly pressurized to perform better, you will have to meet the sales target or complete certain tasks.


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