Armchair Millionaire Community Bulletin: Keeping the Cash Flowing

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Moving abroad--whether for retirement, a new job opportunity or just to sample another way of life--can be a complicated and costly step. Be sure you understand exactly what you're getting yourself into before making the move.

Think about your personal finances the way business owners think about their businesses. They know that no matter how much money the business is making, they have to have sufficient cash flow to make payroll and keep the lights on. Without this cash flow, the business falls apart. It's the same with you: No matter how much you earn, you're headed for financial ruin if you consistently can't pay your bills.

Fortunately, there's plenty of practical cash management experience in the Armchair Millionaire. Here are just two tips we've gleaned:

"We record all of our expenses (and keep all of our receipts) every month on simple worksheets listed by categories--groceries, entertainment, car, medical--as well as regular monthly bills. Spending an extra $30, $40, $50 on something you don't need becomes harder when you know you have to write it down at the end of the day. Keeping the receipts makes it a lot easier to return something, to take advantage of rebate offers and to itemize taxes." --Louise

"I make it a game. I get paid twice monthly as most do. After auto investments and regular bills are taken care of, I divide the amount left by how many days are left 'til payday comes again. That is my daily living budget. Each day I calculate how much I did not spend that I could have and dump it into an online savings account, be it $50 or $5. It adds up fast. I maintain six months' worth of expenses in that account and anything over that amount gets put in play in the various investment options I have going." --kirkisms

In my opinion, keeping a healthy cash flow is part attitude, part technique. Once you've committed to really changing the way you manage your cash, use my checklist of the techniques that will help you do it.

The Armchair Millionaire's Checklist for a Healthy Cash Flow:

Build an emergency fund. A lot of people simply spend everything in their checking accounts every month and stop only when the money is gone. This leaves no cushion for the unforeseen, which can torpedo your ability to keep your head above water. To avoid this, create a stash to be used only in real emergencies. Keep this money in an entirely separate account where you won't be tempted to use it for day-to-day spending. I recommend that you have at least three month's worth of expenses in this account. If you think you can't possibly save that much, set up a monthly automatic withdraw from your checking account to a money market account. The money will be taken out of your account before you have a chance to spend it, and after a month or so, you won't even notice it missing.

Maintain some liquidity. Some people are so determined to invest that they put very last spare dime into their investment accounts. The result is that they can end up with a sizable portfolio, but cash poor when an unexpected expense comes along. The last thing you want to be forced to do is sell a long-term investment in order to simply pay a bill. So make sure that you always keep some liquidity in your funds. The best place for this is a money market account.

Pay bills automatically. One of the reasons people run out of cash to pay essential bills is because their money has already been spent on non-essentials. Avoid this by setting up automatic payments for all your bills. Every company and credit card nowadays will let you arrange to have their payments automatically withdrawn from your checking account. However, don’t let this “behind-the scenes” payment keep you from reviewing those bills each month to keep tabs on how much you’re spending.

Smooth out the spikes in your expenses. Some expenses are fixed from one month to another (your rent or mortgage payments, for instance) and are therefore easy to budget for. It's more challenging to deal with expenses that fluctuate--utility bills that are twice as high in winter, for example, or a car insurance bill that is only due once every six months. Smooth out these fluctuations by planning ahead and setting aside extra every month.

The Bottom Line:

When it comes to maintaining your financial health, managing what you earn is just as important as the amount that you earn. But keeping yourself in the black is easy with a few tricks and the right attitude.

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Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff's newest report, "How to Know When You Are Rich," is now available at

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Lewis Schiff

Armchair Millionaire


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Lewis Schiff