How to improve your cash flow?

I use a budgeting method that some refer to as the 10-20-30-40 rule.  Here is how it works.  First, determine your takehome pay after taxes. This is the amount of money you have to work with every month.

10% of your budget is for Savings.  Period.  Pay yourself first and do this every month even if you have big time debt problems.  This is the key to the entire plan.

20% of your budget is for all Debt except for either rent or a mortgage.  If your debt load is higher than 20%, then I will show you how to make some adjustments to get it to fit into this 20% category.

30% of your budget is for household expenses such as your rent or total mortgage payment including taxes and insurance.

40% of your budget is for everything else:  Food, Insurance, Car repairs, gas, medical expenses, dining out, utilitites, cable TV, etc.

Let's say your take-home pay is $3000 dollars per month.

That means, your budget looks like the following:

10% Savings;  $300

20% Debt:       $600

30% House:    $900

40% Other:     $1200

Since everyone's take-home pay is different, adjust the budget amounts to fit your income for each of the 10-20-30-40 categories.

Next, write down what you are spending each month for each of these categories.  If you are lucky, then you are living within your means.

If you are over budget in any category, then you can take budget from another category as long as you are below budget in that category.

For example:

If you have no debt and you are already saving 10%, then you can use that 20% of your budget to have more spending for either the 30% or 40% category.  Your job is to figure out where you are over budget and by how much.

From there, you can look at actions you can take to get within budget in each category.  Absolutely do not say that you cannot afford to save 10%.  if you do, then that is why you have budget problems and this plan will not work.

If you have big time credit card debt, then I suggest you check into a Debt settlement service where you stop making payments on your credit cards and you start saving about 40% of your total credit card payments into a separate account that you will use to pay off your credit cards over the next 2-3 years for a settled amount.  The key message here is that you need to be done living on credit cards and to turn to live without them.

Look to see if you can pay things off early or refinance them to lower the monthly payments.  Your first goal is to get your budget to balance.  As soon as it is, then you take actions to increase your cash flow to pay down your loans.

Look for areas where you can reduce or eliminate expenses to get within the 10-20-30-40 rule.  Live without some things for a while until you pay off your debt.

Finally, you might need to earn more money to cover the expenses you have if you can't make any more budget cuts.  If you do earn more money, then the addtional income still gets divided up per the 10-20-30-40 rule.

I followed this plan to get out from under 6 figures of unsecured debt, IRS liens, and secured loans to create a positive cash flow of $2000 per month.

In my case, I had to earn more money outside of my full-time job to meet the 10-20-30-40 rule. 

The beauty of this plan is that you end up saving money every month and you get rid of the stress over your budget.  You become in command and the feeling is unbelieveable.

Good luck !