At your place of business, you probably hear the phrase ‘cash flow.’ That term means a business is as concerned about keeping its money as it is about making it. You should be as well. Here are some ways you can keep more of your money, and have more left at the end of the month.
Managing your cash flow means not just holding onto your money as long as you can, but making more money with it while you have it. That means you don’t just let it sit in a checking account, and you don’t send it out as soon as it comes in. Most creditors give you a reasonable time to pay the bill. (Of course, if you have a natural gas company like mine, you get just two weeks. Not much time.) But normally you will have at least 25 days. That’s enough time to earn a few cents, or dollars, on your money in the right vehicle. Just give your bills plenty of time to get there. Don’t chance being late. Of course, if you pay online, you can hold your money longer, and pay just one day before the due date.
A passbook savings account isn’t a good vehicle as it doesn’t pay much interest. A CD doesn’t work because if you have to take money out every two weeks to cover bills, you’re hit with penalties. What you need is a money market account that you can access at any time to transfer money to your checking account when bills come due. While your money is in the money market account it is making more money for you, so even at the end of the month, you end up with extra money left over.
I know many of you are wary of money market funds after the financial collapse in 2008. I have friends who lost half their savings and retirement funds because they pulled out of the stock market and put everything in money markets. But the financial markets are much more stable now, and new legislation in the pipeline will put even more protection in place. You are not going to put all your nest egg in these instruments, just your working capital for month to month operation.
Another ploy to keep your cash flow working is, don’t let Uncle Sam use your money! I know we all enjoy getting a fat tax refund. But think about what that means. It means Uncle has had money you could have been using, and making money with!
If you got a substantial tax refund last year, go over your return and determine how you can reduce your deductions on your W-4 to come out close to even at tax time. That way you can have the use of your money through the year.