Home Life and Family Budgeting 5 Tips to Improve Your Personal Cash Flow

5 Tips to Improve Your Personal Cash Flow

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If you find yourself struggling to keep your head above water when managing your cash flow, here are five quick tips which may be your lifesaver.

1. Plan Your Expenditure Around Your Income

This is what most people already practise. By postponing the purchase of big-ticket items until after receiving your salary or bonus, you can avoid incurring expenses for which you are unable to pay for.

2. Use Credit Cards Effectively

Credit cards are widely accepted by merchants in most major shopping centres. The attractiveness of using credit cards is that you get to defer paying your bill, until a month later on average. Card-issuing banks also promote the use of cards by offering incentives such as rebates and gift redemption. The caveat is that you should avoid paying your credit card bills late or roll-over bills, for doing so would usually incur an exorbitant interest charge of 24% per annum.

3. Use Multiple Credit Cards with Different Billing Dates

If you are still finding it difficult to pay credit card bills promptly, another alternative is to apply for two to three credit cards, whose billing cycles are different from each other. Banks would normally allow you to change billing dates for your credit card, upon request. For example, if you carry two credit cards (A & B) with billing cycle dates of the first and fifteen of each month respectively, you should choose to use Credit Card A in the first half of the month and Credit Card B during the rest of the month. This will effectively extend your credit period from an average of 30 days to about 37 days. If you happen to hold an Amex card, you can further increase your billing period (by up to 50 days) by paying off the Amex bill using another credit card via online banking. This is useful if you want all the breathing space you need!

4. Use Balance Transfers to Your Advantage

If the above tips are still not enough to tide you over, you can consider using balance transfers to pay off your credit cards. Banks routinely offer “zero interest” balance transfers for the first six months, but with an upfront administrative fee of typically 1.5% to 2.5% of the transfer value. This translates to an effective interest rate of about 3.5% to 5.5% per annum. If your cash situation still doesn’t improve after six months, look for another “zero interest” balance transfer offer.

5. Prioritize Your Debts

Many of us do sometimes reach a stage in our lives when we spend beyond our means, be it due to a temporary loss of income, a hospitalization or a spur of the moment shopping spree. The fact that credit is readily available also adds to the problem. In this situation, it is always wise to first pay off the debt which incurs the higher interest, i.e. credit card bills, followed by personal credit lines or overdrafts and then personal bills like mobile subscriptions. If necessary, you can also try to negotiate with your bank to restructure any housing loans that you may have.

Finally, the above tips will offer at most a temporary respite. if you are seemingly unable to get out of debt even after employing all the above tricks, you may seriously need financial counseling!


Last Updated ( Sunday, 22 November 2009 14:41 )  
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