Stay (Cash-Flow) Positive: Look at Personal Budgeting in a New Light

Finance blogger Grace Kim, DVM, offers tips on managing personal finances for those in the veterinary profession. This one (of four) focuses on making and sticking to a budget.

Consistently tracking your expenses is a simple first step when it comes to understanding your cash flow.

by Grace Kim, DVM

When it comes to improving one’s financial health, there is no doubt that budgeting is commonly mentioned as a top priority. Unfortunately, the word budget is often associated with negative thoughts, such as scarcity, deprivation, and unwelcome boundaries. It’s no wonder that even the most well-intentioned person will shy away from budgeting because it feels like a daunting, tedious task. 

In fact, budgeting is the perfect opportunity to exert control over your own hard-earned money. Remember that you have invested an incredible amount of time, effort, and money in order to earn your income. It only makes sense that you would want to make the best use of this income in order to live a fulfilled life.

This requires a reframing of what it means to budget. Budgets are commonly thought of as fixed and unchanging. Frustration often sets in when budgeting attempts that may work for the short term inevitably encounter unexpected expenses that no longer fit into the budget, causing any momentum that was gained to be lost. 

Instead of a budget, it’s more appropriate to focus on your cash flow. Your money situation is actually quite dynamic, as evidenced by your inflow (income) and outflow (expenses). Your income will, no doubt, change over time. Your expenses will fluctuate quite a bit, depending on factors that may or may not be under your control. Your job is to build awareness around your cash-flow situation and aim to always be in a positive cash-flow state, where your income is always greater than your expenses. Finding yourself in a negative cash-flow state is simply another way of saying that you’re going into debt. 

Understanding your cash flow is critical. From this knowledge base, you can make smarter, more informed decisions going forward. No longer are you approaching your money in a reactive state, where you’re simply hoping that you have enough money to pay your bills and maybe save a little bit. Instead, you are deciding to take a proactive approach. You are in control by giving every dollar you earn a job. 

It’s difficult to feel that sense of control when money increasingly exists in a digital state rather than a physical one. Consistently tracking your expenses is a simple first step when it comes to understanding your cash flow. Whether you choose to manually track your expenses using a pen and paper or to use one of the many available apps that link to your accounts, there is bound to be an expense-tracking solution that works for you. Understanding your spending habits first will allow you to be more targeted with any changes you want to make in the future. 

Becoming more fully aware of your income and expenses is essential when it comes to making any positive changes to your financial situation. Get to know your unique cash-flow situation. Approach this exercise with curiosity rather than dread. You will be well on your way to sustainably improving your financial health and wellbeing.

Grace Kim, DVM, is the founder of Richer Life DVM, a website that helps fellow veterinarians improve their financial health and wellness.

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