“Without a review of your cashflows, you cannot successfully create a budget to live within your income and set aside a defined amount for investing”- Tomie Balogun
In our last edition, we discussed starting early and we talked about how important it is to start investing and generating passive income as early as one starts earning active income. However, there’s a discipline that must be enforced if this is going to be possible and it is the discipline of managing your cashflows, the coming in and out of cash.
This is a very helpful activity to help out in managing your cashflows right.
- Get a piece of paper and a pen
- Write out your last month’s earned income (remember that earned income consists employment income, consultancy income and also small business owners’ income). If you don’t know what your last income was, especially for small business owners, it’s important you do the math now
- Next, write out the list of all the expenses you made last month with the amount spent on each class.
- Next, put into percentage, of the income, the amount spent on each expense class.
- Take a good look at the calculation you just did and grade yourself on a scale of 1-10 how well you managed your cashflows in that month.
- Next, get another paper and write out the same income then allocate a percentage of the income to investment
- From what’s left, allot percentages of what each of your expense class should carry. Remember to leave out a percentage for miscellaneous
- Then insert the figures from your income
- Stick to your list because it’s easy to create a budget; it takes discipline to stick to it.
We believe in you!
To your financial independence and freedom
Activity 101: Reviewing My Cashflows