Managing Cashflow-An Outline

A summary of what I have read from various sources.N.

In managing your cashflow, make an exhaustive list of your income and expenditure for the whole year. Include the debts that you have to service and the money that you have to give your parents.

Find the value of Income - Expenditure And Debt and if it is negative, priority goes towards reducing your debt, and then expenditure.

Do not take on unneccessary debt. Ensure that you absolutely need to have that debt eg. HDB flat loan before taking it. And never have credit card debt for it bears huge interest rates. The only difference from loansharks is that banks do not use pig heads when collecting your debt.

Take a long term view of your targets, and from your net positive cash flow, you will be able to see if it is adequate to meet your targets, eg. pay for MBA course at 30 yrs old, sports car by 35 yrs, own property by 45 yrs old,retire with 1 million bucks at 62. If not, do see what expenditures you can reduce. Many financial institutions offer free financial planning advice.

Do also consider insurance as part of your total financial plan.

Remember to set aside cash for emergencies, if possible, 6-9 months of your needs. Whatever is left may be used for investment eg. fixed deposit, bonds, unit trusts, equities, to get better returns on your cash. Bottomline is, only invest cash that you absolutely do not need and do the due dilligence required before making any investment.

In the long-term, you should see your assets grow and you will be on your way to a comfortable retirement. Bear in mind when buying 'assets' such as cars that their value depreciates over time ie. another way to throw cash down the drain.

For more details refer to book 'Personal Assets and Finance' by Koh Seng Kee, available at NUS Forum Co-op.