In the last article we have shown you a new way to get your finances in order and calculate cash flow. Don’t get us wrong — our process is not completely effortless. However, it will do more for you than any magical budgeting application.
Here are our 6 reasons why cash flow will serve you better than budgeting:
- Start with your financial reality
Budgeting often seems like it skipped a few steps when trying to help people. You are asked to put constraints on your spending, before you even understand how you are spending. Then you get demotivated as soon as you overspend and delete the whole application. The goal of the cash flow statement is for you to be clear about your financial reality in the long run. It starts with your life situation, goals, and unique spending, and focuses on letting you understand how you earn and spend. From this profound perception you will be able to develop sustainable financial goals and stick to them. - Adaptable to your life
We all lead different lives — you might travel across the globe as a digital nomad, have 3 children as a single parent, earn your income as a freelancer or side-gigger. Our earnings and expenses differ from one another, and can barely be put in the same few categories. The purpose of our expenses also differs, and can be more important than some pre-set categories. For example, you might be scheduling each month a small trip with your family. Looking at how much a trip (the purpose of the spending) costs with all expenses, including transportation, accommodation, entry tickets and food makes more sense for you than just putting these expenses in the travel, food and entertainment buckets.
The beauty of the cash flow sheet comes from adaptability. You can observe your lifestyle, and find a way to understand and adjust the overview of your finances according to how it makes most sense to you. - Flexible functions
Pre-set calculations on budgeting apps can provide you with a few key sums of your financial reality. However, sometimes we would like to see a bit more, adjust the timeline or the expenses calculated. Following the above example with a monthly trip, you could easily check how much your average spending per trip is, calculate minimums, maximums or medians- whichever function you would like to see. In the cash flow statement, summarizing some select categories, finding averages, adjusting time scopes becomes as easy as selecting a few cells. - Gives you time to focus
Did you know that it takes about 30 minutes for people to get into deep focus? This optimal flow stage reached after 30 minutes is the one which can grant you greater perception and productivity.
This is exactly why you need to understand your finances.
With hundreds of ways to see how your money is coming in and out, you can’t expect to truly comprehend it at a glance. Allow yourself some time to focus. Give yourself the chance to really immerse yourself in your finances and identify those precious opportunities to improve. - Makes you feel committed and accountable
Promoting yourself to be your own CFO, making an appointment in your calendar and sticking to it: all of these steps will increase your commitment and accountability.
First of all, by establishing and sticking to your own appointments you know when the next financial reality check will come. You will not want to show up for yourself with worse results than before.
Secondly, you will develop a true understanding of how you spend and handle your money. You will allow yourself to focus on your financial reality and identify areas to improve with each cash flow statement appointment. This will make you feel empowered to make a change, feel more committed to the cause and shift your mindset in everyday life. - Same time with more results
You might only spend 15 minutes weekly on your budgeting application to readjust your categories and look at a couple of numbers. Do these 15 minutes help you to understand what is going on and help you save money? Did it make you not buy your 15th pair of shoes on sale?
Chances are it did not. But, it still took one hour at least in a month.
You might be better off committing that one hour to your cash flow statement — which will help you understand and change your financial reality.
Are we promising a genie in a bottle?
Will you switch to a 2-hour workweek?
Is this the way to get rich fast?
Definitely not.
But if you want to try something other than budgeting to feel in control of your finances this might just be a better way.
So, get ready to schedule your CFO appointments, allow yourself time to focus, and prepare for your new financial reality in a cash flow statement.
