Find out how to crush negative cash flow that's hurting your finances.
Money Girl
315 MG How to Increase Your Cash Flow (Part 1)
[MUSIC] Hi, friends. Thanks for downloading the Money Girl podcast. [MUSIC] I'm Laura Adams, the author of Money Girl Smart Moves to Grow Rich, a fun and practical guide to personal finance. Order the paperback or ebook from your favorite bookseller. You've probably heard the peppy song accentuate the positive. It was a favorite from the 1940s that explains how accentuating the positive and eliminating the negative is the key to happiness. Instead of attempting to sing it for you, I'll include a link to Bing Crosby's version in the show notes. Though the song certainly wasn't written with cash flow management in mind, believe it or not, the same rules apply. You see, to achieve financial security, you need more positive cash flow and less negative cash flow. We'll cover exactly how to do that in this two-part series. They say that cash is king, and it's true that you won't get very far with your finances unless you have income or cash flow. But how do you increase your cash flow without getting promoted to CEO or winning the lottery? Well, the secret to boosting your cash flow is very simple. You have to increase the assets you own that provide you with positive cash flow and reduce or get rid of the assets and liabilities that cause negative cash flow. Today, we'll focus on how to eliminate the negative, and in part two of this series, we'll cover how to accentuate the positive. Most often, the largest negative cash flows come from our fixed expenses. These include loans on real estate and vehicles, which require you to make the same payment each month. Even if you don't own a home, your rent is also a fixed monthly expense that reduces your cash flow. You also have negative cash flow from variable expenses or those that change from month to month, like food, clothing, and personal care items. These can become even more negative if you buy them on credit. Carrying debt on a high interest credit card can cause the cost of any item to double or even triple because interest gets piled on month after month until you pay the balance in full. So your fixed and variable expenses are negatives that you can whittle down to increase your cash flow. The goal is to have more free cash each month that you can use to pay down additional debts or to invest in assets that throw off positive cash flow. One of the best places to cut out a big chunk of negative cash flow is your housing. Although a home usually appreciates in value over time, the bad news is that it generates lots of negative monthly cash flow. Even if you pay off the mortgage, you still have to pay property taxes, home insurance, and maintenance. Fortunately, there are some clever ways to save money on your home and trim its negative cash flow. Here are five tips to reduce your home expenses. Tip number one, appeal your property tax assessment. Since 2007, most home values in the United States have dropped considerably. However, in some cases, the appraised values that are used to determine tax rates haven't been reduced. Filing a tax appeal requires doing some homework, but might be worth the effort. You'll need to understand what information to collect, when you can file the appeal, and how to work with your local tax assessor. Start by visiting your local tax assessor's website for information about the appeals process. For instance, if you live in San Mateo County, do an online search for property tax assessor San Mateo County. Look for information about appealing your taxes, which is also known as tax abatement. If you don't see any information about this on the website, call your tax appraiser's office and ask for help. Tip number two, reduce your home insurance. Every year, you should review all your insurance coverage to make sure you have enough to be safe, but aren't overpaying. Carefully review what's covered in your home policy and shop around for a better deal. It's easy to use a free site like insurancequotes.com to get multiple insurancequotes from a variety of the nation's top carriers. Before... Tip number three, refinance your mortgage. Refenancing a loan is when you replace it with a brand new loan that has better terms, like a lower interest rate or a longer repayment period. This can save hundreds of dollars each month. It's important to understand that extending the repayment period may give you a lower monthly payment, but also increase the total amount paid over the life of the loan. You won't a free up cash flow each month, but not if it jeopardizes or delays your ability to pay down a loan. Tip number four, downsize. If you've tried your best with the previous tips and your home is still a cash flow killer, you might consider cutting your losses and selling it. You could downsize to a smaller, less expensive home. This can be a very difficult decision, but if getting out from under an expensive property or rental home allows you to break out of a negative cash flow spiral, you'll benefit both financially and emotionally. You could even purchase an income-producing property like a duplex where you live in one unit and rent out the other. This type of arrangement can be a regular source of positive monthly cash flow. Tip number five, get a housemate or two. If you have a spare room, garage or basement in your home, consider renting it out to a roommate on a temporary or permanent basis. And if you rent, sometimes you'll come out ahead by leasing a larger home or apartment with additional bedrooms so you can split costs with more roommates. To reduce your monthly housing costs, you'll need to explore all your options. Don't be afraid to get creative. Brainstorming ideas with friends and family who also want to increase their cash flow can really pay off. Join me for part two of this series where we'll cover how to get more positive cash flow. This episode was written by me and Keith Whelan, the founder of cashflownavigator.com and award-winning free website offering advice and tools to maximize your cash flow. You'll find links to everything I've mentioned, including a show transcript in the Money Girl section at quickandertietips.com. Just look for episode number 315. Called How to Increase Your Cash Flow Part One. Don't forget to check out Money Girl on social media. If you're on Twitter, my username there is @laraatoms with no space, L-A-U-R-A-A-D-A-M-S. On Facebook, just do a search for Money Girl. I love getting your money questions through social media or email at money@quickandertietips.com. I'm really glad you're listening to change. That's all for now. Courtesy of Money Girl, your guide to our richer life. [MUSIC PLAYING] [MUSIC PLAYING] [BLANK_AUDIO]