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10 Effective Ways to Improve Your Cash Flow

Much of how financially stable you are comes down to cash flow—how money flows in and out of your bank account. When you spend less than you earn, you have a positive cash flow. On the other hand, having a negative cash flow means there’s more money leaving your account than there is going in. That can put you in the difficult position of eating into savings or falling into debt.

Beyond being an indicator of how financially stable or stressed you may be, having a net positive cash flow makes meeting your savings goals more attainable. When you make more than you spend, you have the opportunity to put the difference into savings. That can help you stay afloat in an emergency, or achieve other big goals like homeownership. Here are 10 ways to improve your cash flow.

1. Track Your Spending

It’s difficult to change something you don’t fully understand, so start by tracking your spending for a clear view of your cash flow. You could use a budgeting app that links to your bank account to automatically import and categorize your transactions for you. Then, you can see where you’re spending more than you intend to and make a plan for reeling in spending in those categories.

2. Prioritize Saving

If you begin paying bills and making purchases as soon as your paycheck hits, it’s easy to end up with no money left—which doesn’t fit the goal of creating a positive cash flow. To overcome this pattern, try building saving into your budget as a bill—in other words, pay yourself first.

Set a savings goal that works for you and then automate transfers to a high-yield savings account for that amount each payday. If you don’t see that money in your checking account, it’ll help you avoid spending it. Plus, earning interest on your savings provides a small, passive increase to your cash inflow.

3. Look at Your Recurring Expenses

Recurring expenses are charges that hit your bank account each month, such as bills and subscriptions. Some recurring expenses, like utility and phone bills, can’t be cut out completely, though you may be able to negotiate them. You can even try Experian BillFixer™, which does the heavy lifting of negotiating for you.

In other cases, you could be getting charged monthly for bills you forgot about entirely, such as unwanted streaming subscriptions. To decrease your outflow, go through your bank or credit card statement to take inventory of all your recurring expenses, including subscriptions, bills, memberships, cable and the like. Then, cancel what you don’t need.

4. Lower Your Food Spending

A large chunk of your monthly spending probably goes toward food, so targeting savings in this category can make a significant impact on your finances. Small tweaks to your food spending can make a big difference to your cash flow over time. For example, if you rely on eating out or ordering in daily, consider meal prepping or finding some non-fussy weeknight recipes instead. You may also be able to save money on groceries. Consider basing meals around low-cost staples like lentils, beans and eggs; buying store brands; shopping sales and couponing.

5. Save on Transportation

After housing, U.S. households spend the largest percentage of their budget on transportation, according to the Bureau of Labor Statistics. There’s no avoiding the fact that you need a way to get around, but you may have opportunities to shrink your transportation spending without sacrificing mobility.

Depending on where you live, you may be able to walk, bike or take public transit, which are all cheaper options than driving. Also, grouping your errands together so that you only have to head to wherever you do your shopping once a week can help you cut back on fuel. When you do need to buy gas, consider signing up for gas station loyalty rewards programs to help you get discounts.

Lastly, depending on where you live, you could even consider going carless.

6. Get a Side Gig

Reeling in your spending is one half of the cash flow equation. The other is bringing in more money. If you have room in your schedule, consider taking on a side gig.

If you have in-demand skills like marketing or software development, you could try your hand at freelancing online. Other flexible and in-demand options include offering your services as a babysitter or pet sitter, driving for a ridesharing app or becoming a delivery driver.

7. Pay Off Debt

If you’re carrying balances that charge you monthly interest, paying them off is an opportunity for better to reduce your expenses long term.

There are a couple ways you can prioritize which balances to target first, and both have advantages for improving your cash flow. One strategy, the debt snowball method, has you put money toward your smallest balance first. Once that balance is paid off, you move on to the next smallest. Since each balance you carry comes with a monthly bill, taking balances off your plate completely is a win for your cash flow.

Another strategy, the debt avalanche method, has you target your balances in order of highest interest to lowest interest. This strategy can save you the most money on interest over time.

8. Check Your Retail Habits

It’s easy to overspend on retail, especially with tempting opportunities for online shopping always at your fingertips. If unchecked retail spending is a significant monthly outlay for you, consider setting boundaries around how and when you’ll shop.

One strategy is to set a retail budget each month and commit to spending no more than that. Another method is to set a waiting period for purchases. In other words, note down purchases you want to make, then wait a set period of time (such as a week or 10 days) before you pull the trigger. Waiting a bit gives you a chance to consider how the purchase fits into your goals for a better cash flow.

9. Ask for a Raise

One of the most straightforward ways to increase your cash inflow is to ask your employer for a pay raise. If the timing is right, make a plan for how you’ll present your request to your employer. Taking inventory of your accomplishments and researching industry standards for pay in your field can help you make a convincing case for yourself.

10. Lower Your Housing Payment

U.S. households spend more on housing than they do in any other category of spending. Whether you rent or own, consider possibilities for shrinking your monthly housing payment.

If you’re renting, do you have the opportunity to move to a more affordable place? Moving to a home with a smaller floorplan or in a less in-demand area could reap big savings. If your current space and lifestyle allows for it, another option for improving cash flow is getting a roommate.

Beyond the potential for downsizing, homeowners can look at their mortgage for opportunities to save. Depending on what the rates were when your loan originated and where they fall now, you may be able to lower your interest rate by refinancing. That could lower your monthly payments and save you money over the life of your home loan.

The Bottom Line

Positive cash flow is key for financial security, but it can also be challenging to achieve. Like any other area of your financial life, cash flow management is a skill that you can improve over time. Becoming conscious of where your money is going and looking for opportunities to cut back on spending are big steps in the right direction. Over time, spending less than you earn and stashing the difference in savings can help you build financial stability.

For more personalized advice and assistance with your mortgage needs, contact O1ne Mortgage at 213-732-3074. Our team of experts is here to help you achieve your financial goals and secure the best mortgage options available.

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