Your cash flow is the one of the most important factors in your financial life. Understanding your cash flow is all about knowing where your money comes from and where it’s going. Ideally, you have more money coming in than going out — but that’s not the reality for everyone.
Whether you want to stop living paycheck to paycheck, need extra cash to pay off debt, or want to save for a future goal, knowing how to increase cash flow can help you get there faster.
As you’re working on spending less or saving more, it’s essential to keep track of these numbers. Over time, you’ll become more familiar with your spending habits, and it will be easier to know which levers to pull to keep your monthly cash flow strong.
How to increase cash flow
Your net cash flow is your monthly income minus your monthly expenses.
The higher your net cash flow, the better. This gives you more flexibility in working toward your financial goals and liquidity to weather the unexpected. These five simple tips can help you increase personal cash flow.
1. Boost your income
Depending on your situation, bringing in more money may be easier than cutting back on expenes. The good news is that there are a plethora of ways to do it.
Start with your paycheck. Use the IRS’ withholding calculator to make sure you’re not having too much federal and state tax withheld from your paychecks. If you are, you can fill out a new W-4 to give to your employer.
Next, review your deductions to make sure you don’t have anything unnecessary deducted every payday.
Are you paying for an insurance plan that you’re not using? Maybe you can downgrade to a lower tier to save money. Perhaps you’re donating a portion of your paycheck to charity. Is it possible to reduce your contribution or hold off until you’re more confident in your financial situation?
Finally, look for options to increase your income through more work. This can include asking for overtime at your day job, starting a business on the side, or doing odd jobs. The more income streams you create, the easier it will be to maintain a higher cash flow.
2. Cut your expenses
While earning more income makes it easier to increase personal cash flow, it also makes it easier to spend more.
If you have a budget, it may have been a while since you last evaluated it. Over time, needs and expenses change. Take a long, hard look at your budget and decide if there’s anything you can reasonably cut.
If you don’t have a budget, now is a good time to look at where your money is going and where you can stop any bleeding.
For example, if you’re not binging on Netflix or Hulu as much as you used to, it might be worth it to cut that subscription. Have you been living off DoorDash and Grubhub? Set a goal to cook for yourself more often. Each note you make about how you can improve your budget should include a dollar goal.
After you’ve set your goals, keep track of your transactions to make sure you’re spending in line with them. Over time, it’ll become easier to eliminate certain expenses to stay within your budget.
3. Pay off debt
Each U.S. household has an average of $6,662 in credit card debt alone. That’s not to mention auto, student, or mortgage loans, or medical debt.
If you’re one of the many people with debt, getting rid of it is a highly effective way to increase your cash flow. And a couple of the best strategies for doing so are the debt snowball and debt avalanche.
Each method is a bit different in regards to which loans you target, but both encourage you to pay off one loan as quickly as possible, then apply that payment to your next loan until it’s paid off, and so on.
Once you’ve paid off one loan, you’ll free up the cash you were putting toward the monthly payment. What’s more, if you put that extra cash toward your other debts, you can accelerate your debt payoff.
4. Refinance your debt
If you’re not in a position to pay off your debt more quickly, another option is to refinance your debt. You can refinance most types of loans, including student loans, car loans, and home loans. If you have high-interest credit card debt, you can consolidate it with a personal loan, which typically offers a lower interest rate.
Take stock of each of your loans and shop around to see if there’s a way to get a lower interest rate. Then use a refinancing calculator to determine if the savings are worth it.
If you qualify, refinancing can lower your interest rate, your monthly payment, or both.
With a lower interest rate, you’ll also pay less in interest over the life of the loan. And a lower monthly payment means you free up a little extra cash every month to put toward your financial goals.
5. Plan for infrequent recurring expenses
Even if you’re working on all of the four preceding tips, there are certain expenses that come up at random and throw off your progress.
A semi-annual car insurance premium, your Amazon Prime annual membership fee, and the holidays are all a given each year. But since they happen so infrequently, it can be tough to plan for them.
Keep a list of each of your recurring expenses that don’t come up every month and consider putting a small amount of money into a separate savings account each month. That way your cash flow can stay steady throughout the year and you won’t be derailed by these expenses.
Increase personal cash flow to reach your goals
If you’re cash flow negative or neutral, learning how to increase cash flow is the best thing you can do to reach your financial goals. There’s no one best way to do it, but it is important to find something that works for you.
Create a plan based on your situation and the available options and set short- and long-term goals to put that plan into action. It may take some time to make significant improvements, but over time you’ll see how little changes can make a big difference.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.53% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|