On Fridays, Thomas Magnum and I host a Facebook Live we call #FreedomFriday. It’s usually about 9 am or 9:30 am Pacific. They’re recorded, so you can always go back and watch if you’re interested. You can watch them live on my Facebook personal profile (Diane Kennedy) or in the group later, Diane Kennedy’s US Tax Group.
This past Friday, (9/21/18), we went through our own ideas on what we’d do to increase cash flow by $300-$500 per month right away. These are hypothetical examples, but real life actions that Thomas or I have taken. I’ve seen clients do the same thing, especially in the beginning days of a business when cash flow can be uncertain.
Why $300 – $500 per month? It’s estimated that 80% of Americans would not have lost their homes in the past Great Recession if they had made $300-$500 more each month in cash flow.
That’s all it would have taken to stay in their homes. It’s staggering when you think about it. For lack of so little, so much was lost.
So what can you do if you want to increase your cash flow?
This is my take.
I like to use a 5 step plan.
Step One: There are 3 questions to answer.
#1 Where are you now?
#2 Where do you want to be?
#3 What are you prepared to change and what will you not change?
For #1 Where are you now?, this is an honest assessment of your financial situation. Accounting and accountability have the same root word. Your financial statements are not a long narrative on what happened. It’s simply numbers. What are your assets? What are your liabilities? And the difference is your net worth. I’m amazed at how many people get hung up on this first critical step.
For #2 Where do you want to be?, what are your goals? Again, since this a financial exercise, you need numbers. How much wealth? How much debt to pay off? How much passive and/or residual cash flow do you want? Be specific with what you want with the dates you want it by.
For #3 What are you prepared to change? A lot of people tell me “Anything!” but then they put restriction like they won’t move, they won’t start a business, they won’t sell under-performing assets and the like. Be honest. What will you change and what won’t you change?
Step Two: Realize this is now.
If you’ve gone through betrayal or loss, it’s easy to hang on to it. At some point, you have to move on from that place. The faster you can move on, the better. I personally use the phrase “that was then, this is now” as a way to keep me focused on the task at hand.
If you find yourself explaining why you’re in the spot you’re in, you haven’t moved on yet. The faster you can move on, the better.
If you can’t do that, you will carry that stain into all of your future endeavors.
If you’re waiting for things to come back, they’re not. They’re moving forward.
That was then. This is now. Seize your future.
Step Three: Look at cash outflow.
My husband and I do something we call “Cash Flow Sundays”. When we’re actively looking to increase cash flow, we set aside time on Sunday to list out 10 things we can do immediately to get cash in or reduce cash out. Not anything in the future, that’s for later. Now it’s just immediate steps. The first 5 or 6 things that are usually easy and it’s tempting to quit then. Don’t. Keep going until you have 10 things listed.
This is the best way we have found for finding expenses that give us no value.
You can do the same thing for your business. Make common sized financial statements so you can compare based on percentages from month to month. That’s the best way I’ve found to keep an eye on prices.
Step Four: Look at Cash Inflow.
Focus just on things you can do to bring in more cash. On #Freedom Friday, we discussed a lot of the ways you could do that. I’m not going to rehash them all here, just to go Diane Kennedy’s US Tax Group on Facebook and watch the video.
Step Five: Look to the future.
Then, and only then, should you focus on your long term strategy. One of the things I like to focus on is meeting the 10,000 hours requirement generally considered a requirement in order to be a master. It doesn’t mean repeating one year’s experience again and again, but learning as you go, continually pushing your knowledge so you become a master, the best of the world in something.
Once you have that, you have the secret to the future.
That’s what I did with tax. And that’s how I built up my database. Nothing was handed to me. I paid for my education and earned my experience personally. No loans. No gifts. No family money. And 18 months ago I went into a wheelchair for 7 months. Wherever you are and whatever your circumstances, this one thing can unlock the secret to your future.
Follow me at Diane Kennedy’s US Tax Group (Facebook) for more information. For now, these videos are only available there.