How to Increase Your Cash Flow (Part 1)
Money Girl gives tips to increase cash flow and improve your personal finances.
Keith Whelan and Laura Adams
Listen
How to Increase Your Cash Flow (Part 1)
You’ve probably heard the peppy song Ac-Cent-Tchu-Ate the Positive. It was a favorite from the 1940s that explains how accentuating the positive and eliminating the negative is the key to happiness. I’m sure the song wasn’t written with cash flow management in mind—but believe it or not, the same rules apply.
You see, to achieve financial security you need more positive cash flow and less negative cash flow. We’ll cover exactly how to do that, in this 2-part series..
Click here to subscribe to the weekly Money Girl audio podcast—it’s FREE!
How to Increase Your Cash Flow
They say that cash is king. And it’s true that you won’t get very far with your finances unless you have income or cash flow. But how do you increase your cash flow without getting promoted to CEO or winning the lottery?
The secret to boosting your cash flow is very simple: You have to increase the assets you own that provide you with positive cash flow and reduce or get rid of the assets and liabilities that cause negative cash flow. Today, we’ll focus on how to eliminate the negative and in Part 2 of this series, we’ll cover how to accentuate the positive.
What Is Negative Cash Flow?
Most often, the largest negative cash flows come from our fixed expenses. These include loans on real estate and vehicles, which require you to make the same payment each month. Even if you don’t own a home, your rent is also a fixed monthly expense that reduces your cash flow.
You also have negative cash flow from variable expenses, or those that change from month to month, like food, clothing, and personal care items. These can become even more negative if you buy them on credit. Carrying debt on a high-interest credit card can cause the cost of any item to double or even triple because interest gets piled on month after month, until you pay the balance in full.
See also: How to Pay Off Credit Card Debt?
So, your fixed and variable expenses are “negatives” that you can whittle down to increase your cash flow. The goal is to have more free cash each month that you can use to pay down additional debts or to invest in assets that throw off positive cash flow.
One of the best places to cut out a big chunk of negative cash flow is your housing. Although a home usually appreciates in value over time, the bad news is that it generates lots of negative monthly cash flow. Even if you pay off the mortgage, you still have to pay property taxes, home insurance, and maintenance expenses.
How to Save Money on Your Home
Fortunately, there are some clever ways to save money on your home and trim its negative cash flow. Here are 5 tips to reduce your home expenses:
Tip #1: Appeal Your Property Tax Assessment
Since 2007, most home values in the U.S. have dropped considerably. However, in some cases, the appraised values that are used to determine tax rates haven’t been reduced.
Filing a tax appeal requires doing some homework but might be worth the effort. You’ll need to understand what information to collect, when you can file the appeal, and how to work with your local tax assessor.
Start by visiting your local tax assessor’s website for information about the appeals process. For instance, if you live in San Mateo County, do an online search for “property tax collector San Mateo county.” Look for information about appealing your taxes, which is also known as tax abatement. If you don’t see any information about this on the website, call your tax appraiser’s office and ask for help.
Tip #2: Reduce Your Home Insurance
Every year you should review all your insurance coverage to make sure you have enough to be safe but aren’t overpaying. Carefully review what’s covered in your home policy and shop around for a better deal. It’s easy to use a free site like InsuranceQuotes.com to get multiple insurance quotes from a variety of the nation’s top carriers.
Tip #3: Refinance Your Mortgage
Refinancing a loan is when you replace it with a brand new loan that has better terms, like a lower interest rate or a longer repayment period. This can save hundreds of dollars each month.
It’s important to understand that extending the repayment period may give you a lower monthly payment—but also increase the total amount paid over the life of the loan. You want to free up cash flow each month, but not if it jeopardizes or delays your ability to pay down a loan.
Tip #4: Downsize
If you’ve tried your best with the previous tips and your home is still a cash flow killer, you might consider cutting your losses and selling it. You could downsize to a smaller, less expensive home.
This can be a very difficult decision. But if getting out from under an expensive property or rental home allows you to break out of a negative cash flow spiral, you’ll benefit both financially and emotionally.
See also: Selling a Home? 6 Tax Tips to Save You Money
You could even purchase an income producing property, like a duplex, where you live in one unit and rent out the other. This type of arrangement can be a regular source of positive monthly cash flow.
Tip #5: Get a Housemate (or Two)
If you have a spare room, garage, or basement in your home, consider renting it out to a roommate on a temporary or permanent basis. And if you rent, sometimes you’ll come out ahead by leasing a larger home or apartment with additional bedrooms so you can split costs with more roommates.
To reduce your monthly housing costs, you’ll need to explore all your options. Don’t be afraid to get creative. Brainstorming ideas with friends and family who also want to increase their cash flow can really pay off.
Click here to subscribe to the free Money Girl Newsletter for more money tips!
More Articles and Resources You Might Like:
7 Days to Healthier Personal Finances
How to Find a Second Source of Income
How to Make Decisions About Personal Finances?
Money Girl’s Smart Moves to Grow Rich – get the paperback or ebook today!
Get More Money Girl!
There’s a huge archive of past articles and podcasts if you type in what you want to learn about in the search bar at the top of the page. Here are all the many places you can connect with me, learn more about personal finance, and ask your money question:
- Google+
- Money Girl podcast on iTunes (it’s free to subscribe!)
- Email: money@quickanddirtytips.comcreate new email“>money@quickanddirtytips.comcreate new email
Click here to sign up for the free Money Girl Newsletter!
Download FREE chapters of Money Girl’s Smart Moves to Grow Rich
To learn about how to get out of debt, save money, and build wealth, get a copy of my book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. You can even download 2 free book chapters at SmartMovesToGrowRich.com!
This article was written by Laura Adams and Keith Whelan, who is the founder of CashFlowNavigator.com, a free website offering advice and tools to help maximize your cash flow. It won the prestigious Excellence in Financial Literacy Education (EIFLE) Award for 2012.
Cashimage from Shutterstock