4 Steps to a More Comfortable Cash Flow

For better or worse, most retirees live on a fixed budget of some sort. Even if you’ve saved a large sum of money over the years, you still have to plan your retirement account distributions carefully so that you don’t outlive your money. Therefore, managing your cash flow is essential to keeping yourself comfortable in retirement.

There are a few ways to increase the cash flow into your bank account, but for now let’s focus on four ways you can better manage your outgoing cash flow.

Organize. If you’re keeping your financial documents in a cluttered drawer like most people, get them out and sort through them. Create a filing system, and include items like account statements, mortgage information, records of all assets and receipts. A popular belief states that whatever area is physically cluttered in your life will also be cluttered in your mind. Getting your financial information organized is the first step to better financial discipline.

Track monthly expenses. Make a list of monthly expenses, but don’t forget other items that come up more infrequently, such as gifts or tires for your car. Designate part of your monthly budget for infrequent purchases. Then compare the rest of your regular monthly expenses to your income. At this point you will discover either a budget surplus or a shortage.

Identify goals and order priorities. The top of your priorities list will always consist of needs. Then factor in your wants based on their order of importance to you. If you’re suffering from a budget shortage, you’ll have to cut out more wants and find ways to reduce expenses. This is an important conversation to share with your spouse.

Re-evaluate. Needs don’t always remain the same, and our wants change frequently. New expenses such as healthcare can occur, and old expenses can sometimes fade away. Remember regularly adjust your priorities. In time you will learn to anticipate new expenses before they occur, and you’ll automatically adjust your budget so that you rarely or never experience a cash flow problem. Remember that this fourth step, re-evaluation, teaches you the basics of budgeting. It does get easier over time!