Cashflow key to sustaining financial well-being


Money trail: Tracking monthly expenses need not be a troublesome affair, say financial planners. It’s as simple as writing down your monthly expenses on a clean sheet of paper.

IN FINANCIAL terms, cashflow is akin to the bloodstream of a human being – as much as a healthy bloodstream is key to a person’s vitality, so is a healthy cash flow to a person’s financial wellbeing.

It is important that people ensure their financial health via optimal cash-flow management without disregarding this aspect.

Taking care of this part of one’s financial health would also ensure there will be no misfortune in other areas of life.

“Simply put, cash inflow must always be higher than cash outflow. Your expenses should be lower than your income, so you can have a surplus at the end of the day. You must be in control of your cashflow, ” co-founder and executive director of fee-only financial planning company MyFP Services Sdn Bhd, Eng Meei Yu, told StarBiz.

“Cash flow cannot be negative. You have to put down what is your expense budget. Many people, by and large general employees, don’t really know how much they spend on a monthly basis, ” Eng added.

She said that many would just pay off their monthly loans, and should there be money left after this, they would save. However, if there is no money left, then they wouldn’t be able to save.

“Worse still, there are some who due to their inability to manage this (cash flow), will resort to borrowing via personal loans or accumulate credit card debt if they do not have enough money every month.

“These loans have compounded interest, and this is a disaster, if you ask me, ” Eng said.

She said that tracking monthly expenses need not be a troublesome affair: “Just take a piece of paper and write down your monthly expenses – all the loans you pay – and take a good look at this.”

Eng said it is important for people to allocate an expense budget – the leftover amount they have after deducting the allocation for monthly loan repayments.

“It is important for a person to look at where they have overshot if they had spent more than what had been budgeted for, ” she stressed.

She also noted that it may not be practical for everyone to track each and every single expense they occurred.

“What you can do is use your credit card. For me, what I do is I use only one single credit card so everything can be tracked easily. In this way, you can total up each month’s expenses and keep track of it.

“But you must settle the full amount every month and not leave any outstanding owing to the bank, ” Eng said.

“Other than that, we have to be disciplined in terms of cash withdrawal and not keep on resorting to this as and when there is not enough cash to spend, ” she added.

Eng said employing these methods were a good way to rebuild one’s personal wealth even though it might sound restrictive and boring on the surface. “Well, if you have plenty of money or resources then go ahead and spend it to your heart’s desire and content, ” she said.

Meanwhile, MyFP’s founder Robert Foo said that everyone, including the billionaires, ought to have a sound financial plan and management.

“Even though you are at that level, you will still need to plan as wealth is a finite thing and will diminish eventually.

“Even if you had a billion dollars, you will still need to plan properly on what to do with that money, ” Foo said.

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