Expert Q&A: How to manage your cash flow like a hot-shot corporation

You don't have to cut up your credit cards to maintain a positive cash flow. Nor do you have to enlist the services of a high-priced financial advisor to balance your family budget. Rather, knowing a few trade secrets can ensure that you manage your cash flow as efficiently as some of today's most highly successful companies.


Just ask Stephanie Holmes-Winton. Owner of the Nova Scotia-based financial planning consultancy The Money Finder, and author of "Defusing the Debt Bomb" and "$pent," Holmes-Winton is hosting a boot camp in September that aims to help financial planners improve their clients' cash flow using simple and effective solutions.

Read on to discover Holmes-Winton's advice for achieving a positive cash flow that even a CEO would be proud to call one's own. What can consumers learn about cash flow from some of today's top companies?
Stephanie Holmes-Winton: [In times of debt], companies can lay off employees but families can't lay off the kids. However, companies are better at taking the emotion out of it when they cut things they don't need.

What I think people could learn is that no expense is sacred -- everything gets reviewed -- and if the value or need is not there, it goes. 

People often attach so much emotion to different expenses. Kids' sports are a good example.  Parents will often assume that signing up your child for a sports activity is a given. But if you are struggling to pay your credit card and the sports fees are over $1,000 a year, you've really got to consider reducing those costs. What are some simple solutions for better managing your cash flow?
Holmes-Winton: The simplest cash-flow solution of all is cash itself. Don't just take cash whenever you want it. Rather, take a predetermined amount of money to spend on specific categories. 

It helps to separate expenses into 'active cash flow' (the day-to-day stuff, such as groceries, coffee, eating out and movies) and ‘working cash flow' (the stuff that takes care of you and generally isn't under your control like a mortgage, utilities, gasoline and insurance). 

Use cash for your ‘active' expenses, and create a separate bank account for them. And to take better control of your 'working cash flow,' avoid having a debit card attached to these expenses. What are some of the most common impediments to a positive cash flow?
Holmes-Winton: People. The most common impediment is ourselves.

When it comes to money, we're often focused on all the wrong things. The economy, the price of milk, the interest rate on our mortgage. These are things we should think about, but we should really be focused on what we can do about them.

See related: RBC Roundtable: How to battle inflation; 4 ways to spring clean your finances

Published August 31, 2011

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