Budgeting: Finding Cash Flow (Part I)

I’ve decided I’m going to focus on the various advantages of budgeting. Yes – I call it budgeting. Yes – it involves writing down what you spend. Yes – it means you can’t spend willy nilly without reaping the consequences (well, you’ll reap the consequences whether you budget or not). Yes – it means you might turn a bit nerdy on your friends.

Yes – it means you’ll have money. Probably more than enough.

Once you become a master budgeter, you’ll naturally gravitate toward doing something with all of that extra money flying around your house. Dave Ramsey suggests three things that can be done with extra money:

1. Give it.
2. Have fun with it.
3. Invest it.

I like Dave’s approach, and through the next three articles in this four-part series, we’re going to be talking about each aspect in detail. But first, we need to find that extra money.

If you’re using the YNAB system you’re well aware of how it works. You lag one month behind earnings, give every dollar a job, save for rainy days, and don’t beat yourself up (well, not really) over any mistakes. When you implement these Four Rules of Cash Flow you end up with cash. Period. You’ll have it. EOD.

But I don’t make that much money.

There are two ways to address this concern. One is the “I don’t believe you approach” that I use on occasion. My reply is, “Yes you do.”

“No I don’t.”

“Yes, you do.”

And round and round we go. No, not really. With the “I don’t believe you approach” I’m simply trying to point out that most people are making enough money. They just don’t know where it is, what time it’ll be home, what the heck it’s doing when it’s out, and why it leaves so quickly. Yes, much like a teenager, it tends to do its own thing unless there’s a bit of structure (okay, a lot of structure) imposed. You’ve got to set a few ground rules. You’ve got to get on a budget.

It’s amazing, but these “No I don’t” people are usually so wrong! They do have plenty of money. It’s fun to see them realize that. That’s why you’ll hear people say that budgeting is like “giving yourself a raise” – it truly is. And with a raise comes cash flow.

Another way to approach the concern of not having enough money is to agree. They really, truly, may not have enough money. This needs to be addressed in both aspects of the money equation:

Net Cash Flow = Cash In - Cash Out

They might need to increase their Cash In while simultaneously working on their Cash Out. Inevitably, people who really do not have enough money tend to write off their cause as lost. This is wrong! The fight is never over! The war is never lost! When a person with truly low income begins budgeting it is empowering. I promise that it sparks creativity not just with cutting expenses, but also with increasing income. The budget is a reality check – it’s like a tough friend who will tell it to you like it is. A lot of times, this is just what a person may need.

So whether you don’t think you have enough money and are wrong, or think you don’t have enough money and are right, you still need a budget.

I promise you that as you implement the Four Rules to Cash Flow you will find that extra money. You will experience that raise. You’ll be able to face the music. But the great thing about becoming a Budgeting Master is that you can then hold the baton and do the conducting.

It’ll sound great.