Why You Need to Start Cash Flowing
Money Management

Why You Need to Start Cash Flowing

Why You Need to Start Cash Flowing

There are so many terms when it comes to personal finance and so many ways of doing things out there. I mean with a simple search on the Internet you will find endless resources for personal finance and how to go about getting your finances together. The most important is absolutely getting a budget together, cutting expenses, and increasing your income, but it’s also super important to create sinking funds and cash flowing larger expenses.

What is Cash Flowing?

This is one of those terms that is thrown around the personal finance world a lot and it makes sense, it’s super important. Cash flowing is when you have a larger expense and you delay the purchase until you have enough cash saved up for the expense. This tool is used when it is something you didn’t necessarily see coming (unlike a sinking fund that is for known expenses in the future). For example, I am cash flowing a new to me car instead of financing it. Of course, I could go out right now and get a car and finance it, but that would increase my debt. Something I am not interested in doing because I want to live a life of financial independence.

How to Start Cash Flowing.

You’re obviously not going to always use cash flowing, there is a time and a place. If it is a known expense that is happening in the future, like an oil change or yearly membership fee, you should have a sinking fund for it. If it’s something that you need to purchase and have time to save, then cash flow it. I’ll use my example of a new to me car. This isn’t an emergency and I have time to save for it. So, I’m adding money each month to a car fund I created. You need to decide where your priorities are and how quickly you want to cash flow the purchase. For me, I want to have it cash flowed by October, so I am sending a lot of my extra income from side hustles to this fund each month while still sending extra to my debts. Once you have made your decision, you can tweak your budget to find the cash for your purchase. Remember, a budget is not meant to restrict you, but to allow you to make the purchases you want.

Cash flowing has been a total game changer for me and my budget. Just by delaying a purchase until you have the cash to afford it, you can avoid putting yourself into debt. As I said earlier in this post, in order to obtain financial freedom, you can’t be burdened by debt and having to pay companies for past purchases with interest. Have you ever cash flowed a purchase?

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  • https://heyricky.co Ricky Figueroa

    Hi Diana!

    I like the concept of cash-flowing. However, I’ve never done it myself.

    But, this is what I’ve done (may be a similar concept):

    I assign a specific purpose to each of my revenue streams.

    For example…

    If I have a 3 revenue streams, such as affiliate commissions from one company, a course I sell and service I offer… I assign the revenue coming from each one to a different expense, debt, savings, or “thing” I’d like to cover.

    #1 – Monthly Recurring (affiliate) Commission from XYZ Company → Car Payment (if financed)

    #2 – Revenue from Services Offered → Debt

    #3 – Revenue from Course #1 → Savings (for future investment)

    #4 – Revenue from Course #2 → Emergency Fund

    #5 – Income from Job → Monthly Expenses

    You get the idea.

    Now, I did find myself with a dilemma at one point…

    “Should I focus all of my income streams towards paying off debt or should I focus it on investments?”

    I could go either way based on what’s more important to me.

    I decided to focus on paying off debt.

    But I believe it is important to have “side-hustles” to take care of another priority… like investing to increase your income, free up time, etc. Otherwise, it can be emotionally draining and depressing.

    Thank you for the great post!

    Ricky

    • Diana

      Hey Ricky! Thanks for the great comment. I love your strategy to manage your money, it’s unique and it works for you, which is the important part! I definitely still put small amounts of my income towards my investments and focus on my debt. The interest I lose in my debts is much higher than my returns at this point. Recently I have been using my side hustles to invest to increase my income and I hope to see that pay off. Time will tell!

      Thanks for stopping by! 🙂
      Diana

      • https://heyricky.co Ricky Figueroa

        You’re welcome 🙂 I completely understand. The idea behind how I do it is based on simply creating and growing an asset per each thing I want to take care of, even if that “thing” is a toy (aka luxury car, boat, home, etc). Also, for a retirement account I have that is completely tax free (unlike a 401k), because it is an insurance product. So, I would assign one of my assets’ cash flow into that account.

        • Diana

          I love your unique thinking and strategy behind building your wealth, kudos to you! The biggest take away I have is that you make your money really work for you and make it go further. That’s incredible!