Whether it’s for personal use or for your business, cash flow is important. The movement of money in and out keeps everything running smoothly, and you have to know where you stand. But what if it seems that your cash flow isn’t really, well, flowing? If it seems that you’ve tightened your belt in every area and still coming up short, you might have cash flow issues.
Here are some telltale signs that your cash flow is actually at a standstill.
1. You’re using your credit card every month
Lots of people use their credit cards for all purchases these days, and that’s okay – as long as you’re also paying it off. There are definite advantages to using your card, like points or rewards, but these perks are irrelevant if you’re spending money that you don’t actually have. If you can’t pay what you’re spending on your card with cash every month, it’s time to reevaluate how you’re using that card. Think of the real dollars you’re spending every time you tap at the till, and if you don’t have real money to pay off your purchase, reconsider it.
2. You can’t cover your bills
This is a major red flag, and a sign that your budget doesn’t add up. All of your bills need to be accounted for every month, and that includes setting money aside for large future expenses, like taxes. Bills should really be accounted for first, right up there with money for food and shelter. If you find that it’s a challenge to pay all of your bills, it’s likely that you don’t have enough cash coming in; or you’re spending it on things that shouldn’t be as high on the priority list.
3. You’re running out of money at the beginning of the month
If all of your payments come out and you find that you’re already tapped at the start of the month, you’re likely not bringing in enough money. When we add up our living expenses and plan for all of our payments to come out, it’s important to have some wiggle room to carry you through to the next month. Unexpected expenses can pop up, and nothing is as stressful as finding out you don’t have enough money. Make sure you’re earning enough to carry you through the entire month, and not just the typically bill-heavy first week.
4. There are no other costs to cut
So you’ve gone through your subscriptions, pared-down your grocery bill cut back on your nights out, and you’re still not bridging the gap. If you’re planning for your business, maybe you’re just barely scraping by with no profits, or you aren’t left with enough money to pay yourself. When every penny you make is going toward only the necessities, you definitely have cash flow issues. If you’ve cut back in every imaginable area and are still struggling, you need to find a way to bring in more money. It’s as simple as that.
5. You don’t have an emergency fund or cash chest for difficult times
This sign goes largely ignored by many people these days, with the cost of living being so high. It’s very difficult to save any money under these circumstances, and the reality is that most people just don’t. But don’t ignore this telltale sign that your cash flow isn’t healthy. It’s crucial to have something saved for a rainy day, and putting some money in your savings each month must be done, just like any other bill. Otherwise, you’re likely to lean on credit when these surprise expenses inevitably occur.
Final thoughts
It’s easy to ignore cash flow issues when we have the safety net of credit and if we’re managing to scrape by. But, managing your cash flow is a critical practice that alleviates stress and prepares you for the future. Pay it the attention it deserves and reap the rewards down the road.