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Monday, December 7, 2015

Are You Having Problem With Your Cashflow?

Most peers that I know are not adept enough to manage their own cashflow efficiently. Part of the reason I feel they lack the aptitude to do that is because they are so used to drawing fixed income monthly as a salaried employee that they depend on the predictability of these cashflow they received. When the salaries are in, expensive meals and shopping are common to sight amongst a few people I've known. However, when a week has past, you can then clearly see them scaling down on their purchase gradually to the point when it becomes too obvious to notice.
 
 
 
 
Interestingly as I look and experience around, the big problem salaried employees face when it comes to December is the early salary payout timing as compared to the other month. This happens especially when companies are trying to close their book in the fiscal year so any major settlements need to be done earlier. Some companies do even include the annual wage supplement (also known as the 13th month) paid to the employees. What I do notice from most of the peers is these amount of money would finish by the time Christmas is over and now they are left planning the rest of the month + Jan with almost nothing left.
 
This begs the question to all. If you were an employee and were given a choice to receive
 
A.) a year in advance for the work you've not serve
B.) a year at the end after you serve the whole full year
C.) monthly salary like what most companies are doing
 
Let's assume time value of money is not the issue for this. Which of the following would you choose?
 
Everyone in the right frame of mind would surely choose option A because it's the most obvious choice to receive money earlier. But whether or not one can handle their psychological frame of mind and planning is an entirely different ball game. Perhaps you would change on how you would treat on your expenses too from the way you receive the income. I think it's an interesting exercise to ponder.

Personally, managing cashflow is not within my main circle of competence and I am trying to improve myself every time I do the exercise. Given that I don't do specific budgets unlike many bloggers did and my biased dependence on salaried income like many people did spells difficulties to plan my cashflow accordingly. I am in the midst of improving that myself though and I believe I would be better each round but it takes experience and scheduling to work well.
 
What about you? Are you adept at managing your own cashflow? How do you do it?


13 comments:

  1. One way to practice would be how you pay your taxes - lump sum or GIRO every month?

    ReplyDelete
    Replies
    1. Hi Serendib

      That's a good way to navigate.

      Given IRAS allows zero interest GIRO every month, it makes sense of course to go via GIRO than lump sum.

      The more appropriate would be my insurance premium which I paid every month despite being able to pay lower for yearly lump sum.

      I guess cashflow is too important for me.

      Delete
  2. Hi B,

    Can I choose option A, take money and then quit and no work! haha....

    I reckon the problem of poor management of cashflow be it in corporate organization or personal financial mgmt are always poor planning and optimism that you are going to do much better than the reality!

    One way to have good cashflow management is to be a paranoid. This way, you will always think "money is not enough!" regardless of how much ur bonus is.

    But not just any paranoid, but a confident one that always look ahead to grow and take charge of your own life.

    ReplyDelete
    Replies
    1. Hi Rolf

      I think taking option A and then leaving town is the best way to gain quick bucks ;)

      I concur with you that usually it's down to poor planning and not incorporating discount or margin of difference such that when things happen, you have that buffer to go through things without changing much of the circumstances.

      Delete
  3. I'm not sure I would be good at option A. As a teacher, I would get all my summer pay in June at the end of the school year. I would ration it out by month to make sure I didn't overspend. At one point, my husband got paid similar to option B, all at the end of the month. It was horrible for budgeting because when you started the job, you didn't get paid for a whole month, so you always had a negative balance in your checkbook. It would have worked better had we had a similar sum of money to start with.

    ReplyDelete
    Replies
    1. Hi Lisa

      That definitely requires a strong commitment and planning to make things work there, otherwise it's really not easy to succeed in terms of cashflow planning. Sometimes, credit card would work in a while to buffer things through, but it's a little bit like the last option you want to do that.

      Delete
  4. I don't think I have cashflow problem because I am quite a discipline person.
    I have different accounts for various purposes. Once my monthly salary is available, it goes straight to the different accounts.

    ReplyDelete
    Replies
    1. Hi Anonymous

      That's great discipline you have there.

      I read about differentiating your money into different accounts but it could also end up negative with poor planning.

      Delete
  5. Hi B,

    Good post. My Job allows me to have all 3 options of payment and I do utilise all 3 of them, though it's more of a monthly basis than yearly. No issues for me in terms of setting aside money for drier months, so to me the mode of payment is not critical. However, the risk is different for all 3. If you are paid ahead of work, then the risk is that you will run away. If u are paid after work is done, then the risk is that the company won't pay u (or goes bankrupt). The ideal is to pay u daily after each day of work, like those coolies in the past lol

    ReplyDelete
    Replies
    1. Hi LP

      I was thinking about your cashflow when I write this actually :)

      I think there's no doubt you have the most difficult jobs out there in terms of managing cashflow because not only is the income not fixed, but also you get different kinds of payment method which can make your planning even more difficult to plan.

      I think you need to be proud of yourself. You have mastered and graduated from it.

      Delete
  6. Hi B,

    Good post. My Job allows me to have all 3 options of payment and I do utilise all 3 of them, though it's more of a monthly basis than yearly. No issues for me in terms of setting aside money for drier months, so to me the mode of payment is not critical. However, the risk is different for all 3. If you are paid ahead of work, then the risk is that you will run away. If u are paid after work is done, then the risk is that the company won't pay u (or goes bankrupt). The ideal is to pay u daily after each day of work, like those coolies in the past lol

    ReplyDelete
  7. Thanks for giving some nice information about market. your post can really help to trade in the live market.
    Nifty Tips

    ReplyDelete
  8. Hi, I used to budget when i first started work. But over time, i found it to be rather time consuming and sometimes a waste of time as i was getting busier and busier at work and would rather save time and energy from this. I stopped budgeting and still found myself able to save bulk of my salary. I think as long as we stay prudent in general, the spending will be plus/minus roughly there. :)


    On another note, i would prefer C, to receive my salary on a monthly basis. I get to have 12 times of happiness a year compared to one big time. :)

    ReplyDelete

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