Staying on top of your financial health is a vital step in making choices towards a better financial future. One way to do this is to stay in control of your cash flow and keep it positive. If your cash flow is negative – more cash flowing out than coming in – it probably means you have taken a bit of a knock (eeeek!) and you are in need of help.  

Unfortunately, for many people, this means taking on bad debt that destroys your credit health over time. Fortunately, though, we have a step-by-step guide on improving your cash flow that will help you climb back on the financial horse and stay there!  

A good starting point before tackling your cash flow issues (which we’ll get to later on) – is financial knowledge. Knowing your credit score is key in building a better financial future. If you don’t know what it is, Fincheck’s Free Credit Score tool gives you access to this valuable financial information. Maybe you are unsure what credit health is or how to understand your credit report – we’ve unpacked everything in our Credit Health 101 series.    

Now that you’ve got the basics covered, let’s go through the step-by-step guide on improving your cash flow so you can put together your very own cash flow strategy and budget. 

Why is a steady cash flow so important? 

Cash flow will make or break your financial health because if you have no available cash, your financial opportunities will all come to a standstill. 

Apart from this, a lack of cash flow almost always leads to people getting into debt to make up for their financial shortfall. It is one of the top reasons people get into debt habits that lower credit scores and destroy their credit health. 

No cash flow – what are some common things you won’t be able to do? 

• Pay for financial responsibilities like a car loan, home loan, debit orders or credit card payments 
• Maintain household or family expenses like basic food needs 
• Go out with friends or do related recreational experiences 
• Enjoy financial opportunities that come your way 

Now that we’ve determined what cash flow is, and the different issues you may be confronted with – it’s time to begin the groundwork. We’ve put together 5 simple steps to improve your cash flow and financial health.  

1. Spend within your means 

A very obvious step that will transform your personal finances from rubbish status to healthy status – is not to spend more than you earn. This is the most important move when it comes to improving your overall financial health and reversing the debt cycle. 

As we said, it sounds obvious, but it’s a golden financial rule that most people don’t get right.   

Want to understand what you should be spending each month? You can use the many Fincheck calculators and budgeting tools over here. These tools will help you compare the amount of money coming in versus the money going out. 

2. Re-evaluating expenses  

It’s time to break down that shopping wish list and cut things out and find cheaper alternatives. Part of our cash flow game plan is to map out your spending patterns which include online shopping, eating out, those sneaky coffee breaks – anything that falls into your daily routine. It’s crucial that you stop spending money in areas where you can start saving it towards a positive cash flow. When it comes to bigger household items – do your research and shop around.  

Items to do price comparison research on your:  

• Cars 
• Insurance 
• Cheque Cards 
• Groceries 

3. Create an emergency fund 

It’s always a great idea to set aside some funds for a rainy day. A valuable cash flow strategy is to put money towards an emergency fund before you spend any money at all. If you have any spare cash, add a little extra each month towards a savings account. This can be the same account, but the idea is to fill it up like a bucket under a leaking roof (or a running tap if you’re disciplined enough!). 

4. Prioritise your responsibilities  

We’ve all made this mistake as South Africans when it comes to our spending habits – using our positive cash flow on unnecessary items.  When we spend money like this instead of on our financial commitments and future first, we can very quickly fall into a bad debt cycle.  

The worst often does happen and even bucket loads of cash flow can dry up at the source. Recession anyone? Priority spending means your financial future keeps on growing, even though right now it might mean paying home loans, basic credit cards, and important living costs. When these things are paid off, you are able to invest heavily in your savings plan and explore some luxuries.  

Try not to make impulsive purchases or go on spontaneous dinners out if you are trying to resolve your cash flow dilemma. The moment we don’t plan for expenses, we tend to increase our credit card limits to cover the responsibilities. We could also end up taking out a number of personal loans to cover the increasing debt, which in turn has a negative effect on our credit scores. As mentioned with your emergency fund, put the money somewhere you cannot spend it until the debit order goes off!  

5. Hustle 

Having an expense mindset instead of a money-making mindset will always limit your financial potential. 

It’s time to make more money by leveraging the skills you have. Maybe you’ve always wanted to start your own business? Or maybe it’s about forming partnerships to increase your cash flow and revenue stream. Sometimes it just comes down to putting in hard graft in order to get that promotion. Bringing in more money is a sure way to improve your cash flow quickly. 

Below are a couple of side hustle ideas that will help you generate extra cash flow:  

• Sell items on Facebook market place – either new or second hand 
• Online English tutoring – if you have a university degree, you’ll be able to teach children and adults abroad 
• Waitering shifts at a nearby restaurant  
• Start a dog walking service 
• Handyman services – such as changing lightbulbs and mowing the lawn 
• Housesitting services – build a network of friends and peers and offer to watch their house or pets while they are away on holiday.  
• Grocery pickup services – offering to buy groceries for busy moms or elderly  
• Airbnb a spare room in your home.  

Creating a positive cash flow may take some time, but be strict on yourself and stick to the financial goals you’ve set. Once you’ve done this, you’ll be sure to build a financial future you are happy with.  

And yes, we know the above step-by-step guide may be a lot to digest! But, taking control of your cash flow will significantly improve your bad debt, and in turn, your overall credit health. It’s important to remember that this guide is not a once-off remedy to heal your cash flow wounds. It’s something that constantly needs to be fixed and re-evaluated over time.  

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If you are in need of more guidance to help you along your cash flow and financial future journey, Fincheck Academy will equip you with the tools you need.