Poor Cash Management Skills stopping retail investors from Creating Wealth


I do not have surplus money; how can I Invest– Majority of retail Investor I interact with during my Financial Well Being Workshops have common feedback when it comes to investing.

This is common and relates to poor cash management and budgeting skills. Poor cash Management and budgeting skills do not allow investor to save and invest which done properly help them create enough wealth as provided by their cashflows i.e income.

I have many clients earning 70k to 1 lakh per month but prior to meeting me they were hardly saving 15 to 20K per month and were happy that they are investing for their better future. During my initial meeting I conduct Financial Health Checkup and I have found that majority investors are losing opportunity to create wealth as the do not understand possibility of investments provided by proper cash flow management. I have observed following amongst such investors;
1. They have surplus cash but in the absence of proper budgeting, they do not realize and invest less and loose wealth creation opportunity.
2. Mostly investors surplus cash gets consumed as there is a saying ‘if you do not direct cash, cash will have its own direction’ which may not be in consistency of your life goals and requirements
3. Lack of Goal Based planning also prohibit them to allocate financial resources towards their priorities as most of them are not clear with their priorities. For e.g. Recently one Prospective client who during health checkup wished to buy a new home but despite both earning their current cash flow was drained by Car Loan Installments and hence they were not able to save for home and are in conflicting situation of choosing to invest for either children’s education and marriage or buying home.
Best way is to avoid this cash flow trap is to prepare a yearly budget in the beginning of the month and then decide allocation of cash according to your own priority. Investor do need to define their financial goals as it will help them to prioritize their cash flow as per their need.
I always start financial planning with cashflow and budgeting worksheet and then help investor to define and articulate their financial goals and objectives in order to maximize their wealth creation.
How to go about Creating your Personal Cash Flow Statement
To create a personal cash flow statement, does require some discipline.
Why is that? This is because for some People have never been aware where their money is flowing to.
You need to keep track of where the large part of your money is flowing to.
On a high level, you need to:
Identify different sources of income that results in a cash inflow
Identify different categories of cash outflows
Track the cash inflow and cash outflows
Calculate the cash inflow – cash outflows
If you would like to get started, you can use this Personal Cash Flow Spreadsheet as a Template for you to Kick Start.
You can compile one version of this for your recurring cash inflows and cash outflows on an annual basis. Some people might want to update their cash flow statement every quarterly.
In summary your proper budgeting and cashflow management skills can help you achieve wealth you wish to create as also help you achieve a balance between your present financial goals and your future financial goals and objectives ensuring your peace of mind.

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PlanetWealth Financial Advisors
Email: care@planetwealth.in
Phone: +919328190022
First Floor, Modh Mahodaya Bhavan, Opp Chandreshwer Mahadev Temple, Nr. Meghani Circle
Bhavnagar, Gujarat 364001