Managing finances is an important concept that each individual needs to take seriously to avoid unnecessary debt and make future financial plans and investments. If one is not cautious, he or she may focus on the management of their cash flows and financial needs but end up accomplishing little. Simply earning money and paying one’s bill is not a cash flow management but a survival. To have good cash flow management, one needs to understand the concepts of the inflows and outflows of one’s cash deeply. One also needs to understand the steps that he needs to take with his money to achieve greater satisfaction in life. Some of the basic components that one needs to understand include fixed expenses, taxes, savings, discretionary expenses, and the components of one’s income.
The fixed expenses are the expenses that are generally occurred each month, and one has little or no control over them. They consist of expenditures like rentals, secured loan charges, and other utility expenditures. One step that I have ensured to take is living in a relatively cheaper house that does not strain my expenditure. I also ensure that I hardly use utilities like water and electricity which would result in payment of higher bills. Discretionary expenses are those one incurs as a result of choices and, therefore, has control over. I usually ensure that I incur only the necessary expenses and avoid engaging as much as possible in impulse buying and things that would unnecessarily inflate my budget.
Saving presents is a good opportunity of capturing and secure wealth. Therefore, one should try to do so regularly and systematically. I joined a SACCO where I make monthly deposits as a way of saving for future usage. This ensures that my savings are regular and systematic. The other component that one needs to understand well is the component of income. The source of income can be salaries, wages, bonuses, commissions, self-employment, and investment sources. To get additional income, someone can resort to working extra hours or taking a second job. In my situation, I try to get additional income from doing some little part-time jobs.
The last component that one needs to understand in the management of his or her cash flow is tax. This component is usually mandatory for almost everyone, and it is almost impossible to control. I am hoping that the course will give me more insight into understanding financial and cash flow management so that at the end of it, I will be able to spend money more wisely and also save and invest more.