This video could be very useful to anyone starting a new small business so I thought that I would share it with you. I've included a transcript of the video for easy reference.
This video is an incredibly important one. It is how to manage your cash flow and budgeting. If you can master the art of managing your cash flow and budgeting. Life is going to be so much easier you. You will be so much more successful in achieving your personal lifestyle and financial goals, and it's a lot easier than you think. Now before if I launch into this video. I want to make sure that, not only you subscribe to my channel already. But more importantly you've switched on that notification button.
So you know the moment I've uploaded a new video around getting out of debt, cash flow and budgeting. Investing, building long-term passive income streams and financial freedom. Also if you really enjoy this video and want to watch more about it. And learn more about it. I recommend watching this video over here that I previously filmed. At the end of this video. Alright let's talk about cash flow and budgeting. Now first of all no one has really taught how to manage our cash flow budgeting. It's not taught at home and more often than not is not taught in school or university. But when you know how to do this you'll actually really enjoy your banking ritual, and you'll feel so comfortable and so secure financially. Knowing that you're on top and in control of your cash flow and budgeting. Now first of all I want you have all your bank accounts with the one bank.
No more savings accounts floating around in cyberspace. Because if you can't see it you'll forget about it. And I know so many people who've opened up those savings accounts and put $20, $40. After a certain period of time they've completely forgotten about it and don't even know how to log in and get that money. I want you to be able to log on to your internet banking whether it be through your app or your desktop. And see your entire cash flow situation right then and there. This is about making it easy and efficient so that you actually do it. The first account that I want you to have is an everyday to savings account. With a linked ATM debit card. This account is where you allocate money every time you get paid. To pay for your daily, weekly, monthly, fortnightly expenses.
We can help you with your cashflow Accountants in Great Barr.
This is where you set up all your direct debits to come from. So the gym memberships, the mobile phones. This is also where your spend to get your coffees and lunches. And your weekend spending money. You never use credit cards you always just use your everyday savings account. The next account is your lifestyle and emergency account. Now before I explain this account. I want to explain why most of us get in trouble with money, or cash flow and also end up in debt. More often than not our budgets are not the same month-to-month. We might have a really quiet month where we don't have as many living expenses. And we might have some money left over.
And it creates a false sense of security because we see that money that's left over we think. 'oh wow I've got a bit more money in the account that I normally would have. I'm gonna go buy myself something new.' And we go and spend that money. However the next month, or the following month we get hit with a bill that we completely forgot about was coming up. And we don't have enough money in our account so we spent it the month before. So we reach for a credit card and get ourselves back into debt or even worse we get ourselves deeper into debt.
Now this is why I recommend you have a life and emergency savings account. This is like your float account. This is where you stockpile your finances and your cash flow. In preparation to all those ad-hock or irregular bills. So for example our quarterly bills like electricity bills. Or biannual bills, or our annual bills. This is where we will always see at least a couple of thousand dollars in this account. So that when bills come our way. We are not rattled financially and we can get back on with living our lives. And building up these accounts again. Now within this life and emergency account is your SOS money.
So this is the money that keeps you out of trouble. If anything should happen out of the blue an emergency. Again your financial cage is not rattled. Now the question that's probably burning on your lips is. 'Well Canna how much money should I have as an emergency savings amount?' Well there is no one-size-fits-all. Everyone is different it depends on what stresses you out financially. And what your financial responsibilities are. Now for someone who is young say living at home. Got a really good cash flow. They may only want and need say five thousand dollars in emergency money. It's enough to get them through for a couple of months of living expenses and not having to borrow money from people. However I say a young family on one income. With say three young children may need a lot more than that. It may be closer to say $15,000. However you need to ask yourself, what number or what amount of money in my savings account.
Would help me sleep well at night. Now once you know what that number is. I want you to nickname this account with that number in there. So in this example, we would have our life and $5,000 emergency savings account. As the nickname so we can see that every time we log on to our internet banking. Now there is a reason or a method to my madness. It is to stop creating a false sense of security. If we had say $6,000 in our life account. And one day we decided I'm gonna go and upgrade my laptop. I'm gonna go and spend you know five or say fifteen hundred dollars upgrading my laptop. We're going to spend that money but actually we don't really have that money to blow. Because of that six and a half thousand dollar account balance, five thousand dollars is allocated for emergency money. So we cannot be blowing this money unnecessarily.
It is for an emergency use only. I want to make sure you're aware budgeting and cash flow is not about being mean, or depriving yourself financially or being the fun police. It's about balance and it's about giving ourselves spending boundaries that simply all it is. And with boundaries it makes us accountable. So for the example of when you want to upgrade say a laptop, or buy a new dress, or a new handbag. That is perfectly fine we just allocate that to each separate account. Now this would be our lifestyle account and I want you to nickname that account in align to you goal.
For example new handbag account, or new laptop account or. In my case it's my holiday savings account. Now the fourth and final account is actually your financial goal account. This is where I want you to put money in on a regular basis towards a long-term financial goal, that's important to you. So whether that be saving up for the deposit on your first home, or whether it be saving up for an investment portfolio, or even if you're not quite sure what that goal might be. I want you to still open up this account so you create intention and purpose and direction for your cash flow. Now for me personally this is my savings to invest account. I put money into this account on a regular basis and let it sit there until I know where I want to invest that money, and for what financial goal. It is really easy to set these accounts up.
And these three should be internet-based account. With the same account this means as these accounts build up you're actually earning some interest on these savings accounts. Now the next step is to work out our banking rituals. So we know exactly how much money to allocate to each of these four accounts. So that we're always on top of our cash flow I would feel great about our finances. Now I actually have two tools available for you. If you subscribe to the sugar mama website you will get a complimentary budget template to work from. Which will help you work out your total cost of living and how much money you need to allocate to these accounts. The second tool that's available for you is this sugar budget app.
Which you can download from the iTunes Store. This is a much more advanced version, it's quite visual. And explains to you exactly the banking instructions to allocate this money. Now if you'd like to learn more about this I recommend you watch this video here, which is a tutorial as to how to use the sugar budget. It's something that I use on a daily basis and is really helpful. And the links to subscribe to the Sugarmamma website are right here.
And the link to download the sugar budget app is also right here. But also in the video description box below. All right so how do we allocate our money. Say for example I get paid $2,000 after-tax per month by my employer. And my employer pays my pay into my everyday account. From using the sugar budget app or using the complimentary budget template. I know that my living expenses for the month, are around about $1,200 per month. If I've got that much money in my account I should be able to survive financially. I then look at all my upcoming bills that are coming in.
I might even check my diary to see what's due. And I now know that going forward I need to start allocating, approximately $500 per month into this account. Not only to pay for these upcoming bills. But also to slowly start building up my $5,000 emergency account. I then look at my lifestyle goal, which is for example to buy say a new handbag. And it's gonna cost me $2,000 I'd like to buy it and say ten months time. I know that if I want to achieve that goal in time I need to start putting $200 a month away into this savings account. I also want to start doing the thousand dollar project and buying some shares. So I don't know what shares I want to buy yet. But I'm gonna start saving anyway in the preparation to that.
So I'm going to start putting say $100 per month into my savings to invest account. This is the banking ritual I will follow every time I get paid. It is allocating the right amount of money for what is important to me. However if I decide I really want to focus on building up this put emergency money sooner. Or I know that iv'e got some big bills coming in my way sooner rather than later. And I know that they're $500 per month it's going to cut me short.
I can do something else. I'm giving you a quick get out of jail card for free. You can temporarily for go, or simply cut down on these of two accounts for the time being to quickly stockpile this is a priority. So for example you might want to hold off on doing this and maybe, either reduce it to zero or $50 here. And say $100 here, which then allows me to put a little bit more into my life and emergency account.
Like this so you actually have my permission to occasionally tweak your banking ritual. As long as you're putting money to each of these savings account and achieving your financial goal. So the moment you have more than five thousand dollars in emergency money and a healthy float in your life account for these quarterly, bi annual annual bills. You can start beefing up these accounts if that's what's important to you.
But the point is you stick this banking ritual month after month after month. So you don't even think about it you just simply do it. Now this is something that I personally do every month. It gives me so much security and comfort knowing that I'm on top of my cash flow and I never need to rely on a credit card to get me out of trouble.
Thanks to https://youtu.be/Li3HH9cx4AA
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