Worried about a big bill hitting you expectedly? Finding you’re looking at a scary low bank balance too often? This could be highlighting the importance of a household cash flow. Planning your cash flow will help you get ahead of the ins and outs in the bank account that lead to money worries.
A cash flow or cash flow budget is a plan that sets out all of the planned sources and uses of cash. It’s usually set up by month, so you can see if there are any points during the year when you’ll be particularly short of cash.
A typical cash flow has a column for each month, usually laid out in a simple spreadsheet tool. At the top, the template shows all of the expected incoming cash: income, tips, commissions, tax refunds or any other sources. Below that, cash outlays are detailed: outlays on food, transport and other incidentals. Bills that you expect to pay will also be shown in this section, based on when the payments are made. For example, an annual insurance bill is shown entirely within the month when the payment is due.
At the bottom, you’ll be able to calculate the net cash income/outflow for the month. By starting with a current bank account balance, it’s then very easy to project the balance over the rest of the year. In doing so, you’ll know if you’re ever too close to the line. And you’ll have something to check your balance against, for a very real-time measure of how well you’re sticking to your plan.
Microfinance is the provision of financial services such as loans, savings, insurance and training to people living in poverty. It is one of the great success stories in the developing world in the last 30 years and is widely recognised as a just and sustainable solution in alleviating global poverty.
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