Author Topic: How do you manage cash flow if you don't use a budget?  (Read 25826 times)

Zikoris

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Re: How do you manage cash flow if you don't use a budget?
« Reply #100 on: March 24, 2015, 09:18:53 AM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.

Villanelle

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Re: How do you manage cash flow if you don't use a budget?
« Reply #101 on: March 24, 2015, 09:30:29 AM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.
To me, it just means figuring out what cash is available to be moved to investments. 

ria1024

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Re: How do you manage cash flow if you don't use a budget?
« Reply #102 on: March 24, 2015, 09:41:59 AM »
I don't have a budget; at various points I've tracked how much I spend for a while to see where the money is going, and sometimes put it in categories so I can say how I spent money over the last year, but I've never laid out a budget I was supposed to stick to.

I manage cash flow by keeping a $5K float in my checking account; this will cover the mortgage payment, credit card payment (paid in full every month), and any checks I write that month unless things get really crazy.  My paycheck gets deposited into that account every week.

At the end of every month, I look at my account statement in the mail (yes, I get it in the mail; it's a good reminder for me to look at it and it lets me keep a paper record easily).  I read the whole thing, making sure checks have cleared and I don't have anything on there I don't recognize.  Then I make sure that the balance at the end of the month is higher than it was at the beginning of the month.

When the checking account gets up to $8K or so, I move the extra into my savings.  When there's a big project or something crazy happens, I move money the other way ($12K septic system, or paying for a not-very-mustacian wedding).

When it's time to buy something, I do my best to stop and think about it carefully before purchasing, and for larger purchases make sure to shop around for a good price.  But I'm not going to limit myself to a set budget, or buy a lower quality item because there's isn't money in the budget this month.

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #103 on: March 24, 2015, 09:42:26 AM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.
To me, it just means figuring out what cash is available to be moved to investments.

Agreed.  And my personal answer is: everything that isn't spent.  I.e. check bank account, move over any excess above buffer.  More is rolling in than going out, so check every once in awhile and move excesses over buffer to investments.  Nothing to "manage" per say.  :)
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Zikoris

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Re: How do you manage cash flow if you don't use a budget?
« Reply #104 on: March 24, 2015, 09:47:45 AM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.
To me, it just means figuring out what cash is available to be moved to investments.

Agreed.  And my personal answer is: everything that isn't spent.  I.e. check bank account, move over any excess above buffer.  More is rolling in than going out, so check every once in awhile and move excesses over buffer to investments.  Nothing to "manage" per say.  :)

Exactly, it's the "managing" part that confuses me. I get paid, pay off the credit card, dump the rest into investments. I'm not sure what there is to manage exactly.

Villanelle

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Re: How do you manage cash flow if you don't use a budget?
« Reply #105 on: March 24, 2015, 12:14:20 PM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.
To me, it just means figuring out what cash is available to be moved to investments.

Agreed.  And my personal answer is: everything that isn't spent.  I.e. check bank account, move over any excess above buffer.  More is rolling in than going out, so check every once in awhile and move excesses over buffer to investments.  Nothing to "manage" per say.  :)

Exactly, it's the "managing" part that confuses me. I get paid, pay off the credit card, dump the rest into investments. I'm not sure what there is to manage exactly.

My system is about the same, but the "managing" comes in when I know, depending on what point in the pay/spend cycle we are, how much is really available to me moved over.  Really, it takes less than 15 minutes a month, so it certainly isn't all that intense, but there is some minimal amount of strategy involved, I guess.  If I have a $5000 balance in the 17th, that means something very different than if I have $5000 on the 4th.  Now that I've figured all that out, it takes nearly zero brain power, but I suppose it could still be loosely defined as "managing".  I've never called it that before, but if the OP or others apply that term, I don't think it's inaccurate. 

choppingwood

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Re: How do you manage cash flow if you don't use a budget?
« Reply #106 on: March 24, 2015, 01:24:17 PM »
I guess I should ask since I don't really get it: What's the benefit of "managing cash flow", and what does it involve? Assuming the person in question is Mustachian and only spends a fraction of their income.

The issue really been about managing the uninvested part of the cash coming in and going out, so that there is enough at the end of the pay period to pay for the miscellaneous expenses that are part of life. I don't use credit cards for my expenses. I use cash, so the amount for this is finite in a given period.

So, for example, in the pay period where I was going on a trip, the house insurance bill turned out to have gone up 40% and when I went to pay the registration of my vehicle, a speeding ticket needed to be paid in order for them to release the registration. (I'm not defending the expense; it just is a real expense.) Neither of these is an emergency expense, so I wasn't going to dig into that reserve to cover it.

My investment for the pay period is the first thing that happens, so the rest has to happen from what is left. In a budget, you might have x for gas and y for food/household supplies and z for utilities. That pay period I had set aside money to cover insurance plus a 5% increase and money for the car registration, but had planned to pay the speeding ticket the following pay period.  A buffer in my chequing account would be an easy way to deal with this, so I would not be figuring out what category to adjust in my budget to make ends meet. And in other situations, being more consistent about mindful spending would mean that I hadn't used up the cash when I realize I still need garbage bags the day before new money comes in.

morning owl

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Re: How do you manage cash flow if you don't use a budget?
« Reply #107 on: March 24, 2015, 01:40:46 PM »

Exactly, it's the "managing" part that confuses me. I get paid, pay off the credit card, dump the rest into investments. I'm not sure what there is to manage exactly.

I have a really hard time managing inflow and outflow with my income, because it's so variable. I freelance, so on some months I might make $0, on others (rare!) I can make $10,000. I can't really say "I'll deposit X amount into my investment accounts this month!" because I may need that money to live off of in the following month.

So my solution is that I just try to keep a fairly big buffer of cash. I also use YNAB, though I don't see this as 'budgeting' necessarily. I.e. I don't set limits on what to spend every month. I just use it to see where my money is going, and to make sure I have enough of a buffer before I send money off into investments.


frugaliknowit

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Re: How do you manage cash flow if you don't use a budget?
« Reply #108 on: March 24, 2015, 02:51:42 PM »
Since, in the short run, the most productive place to put my pay is my checking account (2.75% yield):

On an excel sheet representing my checking account, I have 6 columns:

Emergency Fund, Dental Fund, Slush Fund, Subtotal, Checking, Total (Subtotal + Checking = actual checking balance).

Each payday I add an amount to emergency, dental, and Slush.  As bills are paid, they come out of checking, or if they are
irregular (like vacation), they come out of "slush".  Obviously, pay the dentist out of "dental".

Emergency + Dental + Slush = Subtotal (these are virtual accounts)

Subtotal + "Checking" (unallocated) = Total Balance  When "checking" is negative, I have overspent.  In some cases I have to remove from "slush" and place in "checking".

Emergency Fund gets invested when it's large enough (Jan 1 into an IRA).

deborah

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Re: How do you manage cash flow if you don't use a budget?
« Reply #109 on: March 24, 2015, 05:03:26 PM »
Because most of my big bills are in one part of the year, cash flow at that time is an issue.

I thought of changing the timing of the bills, but that doesn't really work. We have a system where license renewal is on your birthday, so that cannot be changed - nor can other government payments (rates can be one payment or spread throughout the year, but you pay 5% more so one payment is it). Health Insurance goes up each year on 1st April, so paying it in March means you always pay 6% or so less.

So optimisation of the cost of big bills automatically gave me a cash flow problem!