The Most Important Thing in Personal Finance: Cashflow

Personal finance can be overwhelming. Investments, debts, assets, income, expenses, and even insurance are just some of the areas one can work on to improve overall finances.

However, what if you’re not from a financial background? What if you work long hours or have family commitments that don’t give you enough time to deal with your finances? What if you don’t like the topic of finance? Does that mean you are destined for financial doom? Well, not really.

There is one thing that you can work on that, in my professional opinion, is the most important thing to everyone’s personal finance. Luckily for us, it is something that generally everyone can understand and requires no extensive knowledge.

What I’m talking about is Cashflow. At its essence, cashflow boils down to income vs expenses.

Good cashflow is when income is more than expenses. Bad cashflow is when expenses are higher than income. For everyone out there feeling like they’re having trouble with personal finance, do just one thing. Get good cashflow.

See when you have good cashflow, everything else in your personal finances will be better. 

Good cashflow gives you the capacity to invest. Maybe you don’t want to invest now, but you can if and when you want to. You can build up assets.

You will be able to service your important loans better (home loan) and you should not need to take bad loans (personal loans, loan sharks).

You can build up an emergency fund, providing stability for you and your family in event of job loss or unforeseen events.

You can buy insurance to protect yourself and your family from the costs of serious medical conditions.

You can also treat yourself to holidays or nicer things once in a while, improving quality of life and of course, mental health.

Finally, you will FEEL better about your finances. Imagine if you have an additional surplus of RM1,000 more each month. You’d feel much better wouldn’t you?

I believe that money is not inherently bad and therefore it should not make us feel bad. If you aren’t feeling too good about your money right now, there’s no better place to start than with your cashflow.